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There’s no two ways about it – it’s a tough housing market for buyers.
The past year has changed the real estate industry, with virtual tours and remote closings becoming standard. Record-breaking lows for mortgage rates have fueled demand at a time when fewer homes are for sale. “It’s a crazy market to be in. I empathize with people who are buying right now,” says David Visentin, a real estate agent and co-host of HGTV’s Love It or List It.
So if you’re bidding on a home, you probably won’t be the only one.
We talked with Visentin about what buyers can do to successfully navigate today’s market. Based on decades of experience in the real estate industry, this is his advice for homebuyers.
4 Tips for Surviving Today’s Seller’s Market
Right now, you’ll need patience to find a home you want at an affordable price. If you don’t happen to live in a remote area or are searching for an extremely niche home, it can take months to get an offer accepted on a home you want. “Unless you get lucky, you can expect to bid on a few houses, three or four or five houses, before you get the one,” Visentin says.
With so much competition, buyers don’t have much leverage to negotiate with the seller. So it’s important to consider Visentin’s advice, so you can make your best offer without giving into the temptation to win the bid by paying more than you can afford.
1. Know what you want and can afford
Before you start house hunting it’s essential to figure out what type of home you want and where you want to live. In a fast-moving market, you don’t want to waste time. Knowing what you want sets you up to be able to move quickly. “That’s why on every reality television show that’s got real estate in it they always talk about the must-haves,” Visentin says. So make a list ahead of time of everything you or your family needs, including details outside of the property, such as the school district and how close you may be to your work or amenities.
Ignore the competition when making an offer on a house and bid only what comfortably fits into your homebuying budget.
You should also shop around for a mortgage lender and get preapproved for a home loan beforehand. Once you’re preapproved you’ll have a good idea of how much money you can borrow. But what you can afford to spend on a home and what the bank is willing to lend you, may be different. “Understand that you’re not just dealing with a mortgage every month, you’re dealing with the other part of your life, which sometimes can be as much as your mortgage,” Visentin says. “So even though the bank says, you can afford that house, they don’t really know what your life is like.”
2. Work with a local real estate agent
Real estate is all about location, and where you’re looking to buy a home will change what you need from a real estate agent. So it’s important to work with someone who has experience with the market, and even sub-market, you’re interested in. “You can’t talk about cities like Toronto, and New York, just as a [single real estate market]. There are so many of these little micro markets within the city that are completely different from each other,” Visentin says. That’s why it’s so important to understand where you’d like to live and how much house you can afford, because it makes it easier to find the right real estate professional to work with.
Someone may have 20 years of real estate experience, but that doesn’t mean they’re a good fit for you. If you want to buy a condo with a VA loan and the agent has never worked with veterans or helped anyone purchase a condo, then an agent with less overall experience could be a better fit if they’ve worked with homebuyers like you. “When you’re in a niche market, you need a realtor that knows that area … they have to have the knowledge base that’s going to help you get a house,” Visentin says.
3. Ignore the competition
You want to make the best offer you can for the home you want because that’s going to be the main thing driving the seller’s decision — who’s willing to pay the most. But when you’re making an offer, you shouldn’t consider the competition. “You have to go into it making the offer as if there are no other offers,” Visentin says. The offer has to make sense for you financially.
If you’ve been looking for a home for months and had one offer rejected and after another, it can be tempting to increase your budget. But that’s not likely to be a good long-term decision. “Do not, no matter what you think, go beyond that max,” he says. “It’s really tough for buyers to do this. Because they get emotionally involved in a house. But you really do have to take that out of the equation.”
In today’s market, you may not get into your dream home as quickly as you expected. But getting into the right home a bit later is better than getting into the wrong home right now.
4. Make your offer stand out
When a seller is considering offers that are close in price, you’ll want to make yours stand out. The first thing to look at is the contingencies, or conditions. “What conditions do you have to have, and what conditions can you do without? The least [number] of conditions the better … even though I still think it’s a bit of a risk,” Visentin says. So before you waive any contingencies you need to fully understand what you’re giving up.
A contingency typically gives the buyer the option to walk away from a deal if certain conditions aren’t met. For example, an inspection contingency gives the buyer leverage in negotiating for repairs if there are any significant issues. So sellers prefer offers with fewer conditions because there aren’t as many ways for the deal to fall through. But as a buyer, you’ll typically only want to waive a contingency if you understand and can accept the potential financial risk. “You might have a house that needs work,” Visentin says. “My recommendation with that is, get your building inspector lined up and have them with you when you go to look at the house so you can get a read on what [repairs] you may have to do,” Visentin says.
Even if you aren’t willing to waive any contingencies, there are other ways to spruce up your offer. You may be able to make your offer more appealing without spending more money. Find out what the seller may want that isn’t obvious. Carefully review the listing and contact, or have your agent talk to the listing agent. “Any information you can find out from the listing agent is helpful,” he says. The seller may have a favored closing date or there may be items they don’t want to take with them. “If there’s a pool table that they’ve included, you may not want the pool table … but put it in [the offer], they probably put it in there because they don’t want to take it with them.”
If the seller is considering offers that are close in price, these small details can help your offer get accepted.