Scraping together a down payment and winning mortgage approval are just the first steps in today’s more rigorous path to ownership.
In March, there were one percent fewer homes on the market than in March 2015, yet sales are higher. “Inventory is moving more quickly,” says Jonathan Smoke, chief economist at realtor.com.
A one percent decline in houses to choose from may not sound like much, but there’s a larger percentage of higher-priced homes in the mix, so the shortage is more pronounced on the lower price end.
Tight supply of entry-level housing is a lingering effect from the last housing downturn, says Daren Bloomquist of data firm RealtyTrac, Irvine, Calif. Many owners who otherwise would be selling and moving up are still struggling with big mortgages.
Obviously, though, with homes selling quickly, some buyers have found a way to beat the competition.
Get Ready, Get Set
“Buyers and their agents must be as organized and committed as if they were planning the invasion of Normandy,” says John Pinto, Realty World-John V. Pinto & Associates, San Jose, Calif.
Agents can set up messages to alert buyers the moment that properties meeting their criteria land on the MLS. Buyers ready to visit the property as soon as sellers allow a tour are able to submit a purchase contract that could be accepted before other contracts come in, Pinto says.
Being first may not cinch the deal if better offers roll in quickly. “The greatest struggle for first-time homebuyers is outbidding investors who are paying a premium for real estate,” says Fite.
Show Financial Strength
Price is key to a winning offer but it’s also important for a buyer to inspire confidence that he’s good for the offered price.
Pre-approval, a written statement from a lender that states that the borrower qualifies for a certain loan amount under the lender’s guidelines, is often insufficient in a competitive market. A pre-approval letter is not an offer or a commitment to make a loan. Instead, buyers might consider going a step further and submitting all the paperwork required for an actual loan. “It’s called pre-underwriting,” says Gibran Nicholas, chief executive officer of CMPS Institute, an organization that certifies bankers and brokers.
Prepare to up your Game
In a seller’s market, the list price is often viewed just as a starting point, says Rob McGarty of Surefield, a real estate agency in Seattle. In fact, many purchase contracts include an escalator clause that indicates that if a competing offer comes in, a buyer is prepared to beat that price up to a specified limit.
Sometimes sellers will set a list price so high, however, that it stays on the market for a couple of weeks.
That’s how Andres Ortiz bought his home in the competitive northern Seattle market. Having carefully studied prices for other homes in the location, Ortiz and his agent had confidence that the price they offered was right in line with the market. “The seller even agreed to make some small repairs,” says McGarty.