Blog posted On April 15, 2021
Everything moves faster when buyer competition is high. The offers roll in quicker, the houses close sooner, and the seller often gets much more than their asking price. Consequently, many buyers feel the pressure to act fast too. This can lead you to skip inspections, overpay, and wind up in a bad financial position in the long run. To help you avoid these common mistakes, here are five DOs and DON’Ts to guide you through buying in a busy market.
When there are several other buyers looking at your dream home, you want to be as prepared as possible. To stay one step ahead of the game, make sure you get preapproved before you start your home search. Having a letter of preapproval shows the seller that you are serious about your interest and have the means to pay for the home. Obtaining a letter of preapproval takes time, so you don’t want to be scrambling for it at the last second or you might not get your offer in on time.
Also, make sure you have other documents ready to submit for your loan application – including your proof of income/ employment (pay stubs, tax returns, W-2 statements etc.), assets (bank statements to show that you have the funds to pay for the mortgage), residential history (previous two years’ worth), your credit history, and general information like your Social Security Number and date of birth.
If the housing market has high buyer demand and/or low inventory, then prices will likely rise. Plus, if buyer competition is high, many people will make offers that exceed the seller’s asking price by thousands of dollars. To compete with these offers, you should look at homes that are 5% to 10% lower than your maximum price. That way, if you have to increase your offer to compete, you won’t exceed your budget limit. It’s important to feel confident and comfortable with the price you are paying for your home.
Another common buyer tactic in a competitive market is to skip home inspections. Opting to waive inspections and contingencies can make your offer more appealing to the seller, but that doesn’t always mean it’s a good idea. Home inspections help spot safety hazards in a home’s structure, systems, and all of its other interior and exterior features. For example, a home inspector could find small issues you wouldn’t have noticed like asbestos, lead paint, or faulty electrical wiring – all of which can be dangerous if left unfixed.
Virtual tours are not the same. Oftentimes, a virtual tour will highlight a home’s most desirable features. Also, a space can look very different in pictures than it does in person. Home photographers are hired to make spaces look nicer and sometimes bigger than they actually are. There are certain features of the home you won’t be able to see in pictures – like cigarette smoke, the sound of traffic or neighbors, and pet odors. If you physically can’t visit the home before your purchase, make sure you hire a trusted real estate agent. Good REALTORS® will tell you exactly what they smell, hear, or feel. “If we’re together on FaceTime and it smells like dog, I am going to tell you it smells like dog,” says Kathleen Martin, a real estate agent in Bethesda, Md.
A home warranty will typically cover the costs to repair or replace items like your oven, stovetop, air conditioner/ heating systems, electrical issues, or plumbing problems. It’s only $1,000, which equals to about $83 per month. Though this might sound expensive, it is well worth it for systems that cost thousands of dollars to replace. Some items covered in a home warranty might be covered in your homeowner’s insurance, so be sure to check with your insurer before purchasing more protection.
Buying a house in a competitive market can be stressful, but the more prepared you are, the better off you’ll be. Working with an experienced REALTOR® and lender can help guide you through the DOs and DON’Ts. If you would like to connect with an agent or loan officer, let us know.