You've made the big, important decision to buy a new home. Congrats! Yet the current housing market situation seems more like playing the lottery than shopping for that perfect piece of jewelry. While the current climate means the house buying competition is stiff, it is still possible to land your dream home in this tough market. With historically low inventory, and houses typically getting more than 10 offers, we chatted with expert Bergen County realtor Sara Deutsch of Keller Williams Realty for tips on getting a leg up when buying a house, so you can turn your dreams into realty reality.
Before You Start Your Search
The number one step to take before you even start your search is to get preapproved. Reach out to a mortgage lender – if you will be getting a mortgage – and provide them with the necessary paperwork so they can review your financials. Your realtor can suggest lenders they and their clients have successfully worked with. The lender will then let you know the amount you're preapproved for, which will help you better understand your budget. "I always recommend to my buyers to look at homes that are 10 percent below their budget," says Deutsch. Because homes are selling for much higher than the listing price, this will help you to be more competitive in a bidding war situation.
Be a Strong Buyer
We all know that cash is, and will always be, king. The reason? There's little risk in a transaction with a cash buyer. However, if you aren't able to pay for a home in cash, there are ways to make yourself an equally strong and attractive buyer. If you're getting a mortgage, aim for a strong down payment amount. While the standard down payment is 20 percent, the more you can put down the better. Ultimately, be prepared to go well above the list price for a house you love, but don't forget its worth – and worth to you. Look to the future and know your limits, as well as the value of the home in a regular market. Ask yourself, will you outgrow the home in 7 years? Is this your forever home? "Remember to think logically, not emotionally. You never know where life is going to take you, and you don't want to end up losing a lot of money on a house you overbid on," says Deutsch.
Get Creative With Your Offers
Submitting an offer in this market means more than just bidding the highest price. There are some additional items to consider adding to your offer, which a seller may find attractive and will give you an edge against the competition. While full cash offers don't require an appraisal, if you're using a mortgage but have some extra cash in the bank, you can waive an appraisal, also called an appraisal contingency. This says to a seller that if the house underappraises – which is happening more lately because houses are selling significantly over the list price – that you have enough funds to cover the deficit so the deal doesn't have to be renegotiated.
Another contingency that can be added to an offer is an inspection contingency. "We always tell our buyers to have an inspection, but you can limit the inspection concessions," says Deutsch. This means that instead of going line by line, to tell a seller that the inspection will be more for informational purposes, and only used for big problems including structural, mechanical and environmental issues. While some buyers may waive the inspection altogether, you don't want to blindly go into a sale, unaware of potential costly issues.
When it comes to an offer, be flexible with your closing date and work with the seller on what works best for them. A trend that is becoming more popular is for a seller to agree on a 60 day closing with a use and occupancy agreement. This means that the seller will rent back the home from the buyer for a specific amount of time. This is beneficial to the seller as homes are selling so quickly that they may need time to find their own next home, or use the money from the sale of their home for their own closing.
Aside from flexibility in the closing date, being flexible during your search may also help you land the house of your dreams. Low inventory should translate to widening your search if that's possible for your family. Instead of limiting yourself to one or two towns, open your search to as many towns as possible. And be prepared to act fast if you find something you love! Visit open houses the first weekend, otherwise the house will likely be off the market before you have a chance to see it.
The good news? April, May and early June are the most popular months in the housing market, and Deutsch expects it to continue to trend in the right direction for buyers. "The market will continue to go up and down, so don't wait to buy because rates may continue to rise and you never know what the future holds," says Deutsch. Above all, use your realtor as a resource, and you should see some home-buying success in your future.