In tough homebuying market, take steps to be an attractive buyer
For months, most of the region has experienced a whitehot real estate market as interest rates remained low and people sought new homes to fit their pandemicinfluenced work, school and leisure lifestyles.
With so many people looking to buy, competition for homes in many areas has become even more fierce than expected, with reports that February’s existing home sales dropped more than expected due to inventory shortages, including a record 29.5% year-over-year drop in available homes.
Buyers are feeling the pressure to find a home, too, as a recent WSFS Mortgage study found that buyers’ confidence they can buy a home this year is down 10% from the study’s 2020 findings.
These factors have placed an even higher emphasis on finances. It’s no longer enough to get pre-qualified and conduct a methodical search for the perfect home, then open negotiations to get as many concessions as possible from the seller.
You need to act fast and make yourself as attractive a buyer as possible. Here are a few moves you can make to get your offers to the top of the list.
Get your financial house in order
This step is crucial and requires more than having the paperwork necessary to prequalify for a mortgage.
First, get that prequalification. Many realtors won’t even show homes to potential buyers with a prequalification that sits in the same range as the price of the house.
Next, make sure you pay off or reduce any debt you have, such as credit cards and personal loans, and keep your bank accounts flush with cash. Mortgages can take up to 90 days to close due to the volume lenders are experiencing, so make sure your budget and finances are in peak standing throughout the process.
The reality is that realtors are swamped with helping their existing clients buy homes, and the WSFS Mortgage study found that 82% of respondents prefer to use the same realtor they hired before. Many realtors simply may not have the capacity to take on new or additional clients who aren’t at top financial preparedness.
Know your limits
Having a price range in mind is great, but in this homebuying environment, knowing the top limit of your budget is crucial.
You won’t have time to waste looking at houses that are beyond your financial means. Too many homes are receiving multiple competitive offers — the prices will not drop to your range.
Instead, focus on homes that are within your range, and work with your realtor to include escalator clauses in your offer. These clauses allow you to automatically raise your offer, up to a predetermined amount, if another offer beats yours. This can save time for you and your realtor when determining how high you want to go to get a specific home.
Be decisive
This is no time for negotiating or taking a few days to decide whether you are ready to put in an offer. Some homes are only on the market for a couple days before an offer is accepted. Have an action plan in place with your realtor, whether it involves escalator clause, or you deploy a strategy of going in with your best and final offer so you can quickly move on to another opportunity.
Work closely with your realtor and mortgage advisor to take these steps and more, as your personal financial situation may offer even more opportunities for you to go into the homebuying market with financial flexibility to secure the dream home you’re looking for. Jeffrey M. Ruben joined WSFS through its acquisition of Array Financial, a full-service mortgage banking organization, and Arrow Land Transfer in August 2013. Jeff formed Array and Arrow in 2005, having previously held senior executive roles at financial and legal institutions.