How to Win as a Buyer
Today’s market is something far more complicated than anything we have seen in years. With a serious shortage of homes on the market, the public’s access to near historic low loan rates, and rising demand from buyers, it is a competitive landscape that can seem overwhelming. So, how does a buyer win in this market?
Get your Financial House in Order
The greatest athletes in the world know that one of the keys to be successful is preparation and purchasing a home is no different. The first step is getting your financial house in order. This process will be different for everyone, but you need to know where you stand financially before you start. Think of this as getting a baseline for the beginning of your preparation. Many home buyers find themselves saddled with too much debt and not enough cash. You need to set up a plan to reduce debt and increase your cash savings. One of the best ways to do this is to work with a financial advisor who can come up with a step by step plan on how to achieve this.
Assemble Your Team
Once you get your financial situation in order, you want to build out the rest of your team. A critical decision is finding a real estate agent that works for you. But what should you be looking for in an agent? Make a point of surrounding yourself with people who will help you have the best experience while giving you a strategic advantage over the other buyers you’re going to be competing against. Something a lot of people may not realize is that real estate is largely a relationship business. The way an agent is perceived and the relationships they have play a significant role in whether your offer is selected. Like most businesses, real estate agents want to work with people they can trust and have a pleasant experience working with. So as a buyer, make sure your agent has a good reputation and the experience necessary to guide you through the purchasing process. An agent that “doesn’t play well with others” can often hurt more than help.
The Truth Behind Rebates
While deciding to partner with an agent that can offer you a discount on commissions might be appealing, it could be costing you more than you realize. Often when an agent offers these types of arrangements, it’s because they are newer to real estate which means they don’t have the relationships or experience needed to get you the home you’re after. Also, traditional agents prefer not to work with discount agencies if at all possible, which can adversely affect you in this competitive climate.
Lender: Choose Wisely
Your lender is going to play a big role in how your home buying experience unfolds. Many people will be inclined to go towards big banks that can offer a lower interest rate. Unfortunately, this can lead to problems down the road. Given the size of these institutions, they can be slow to make progress on your application and may even wait to review everything in detail until you are in escrow. This is where headaches can really occur and can be the reason that a deal falls apart. During the review process the bank may have to change the specifics of your mortgage. Some of those changes may include a different loan amount or a new rate because you don’t meet the very specific criteria that may not have been relayed to you upfront. So how do you get around this? Opt for a smaller bank. While the rates may not be as low as the ones offered by the larger banks, the customer experience can be far better. You’ll likely have your file reviewed earlier in the process and they will work with you to come up with a plan going forward. Many listing agents are far more comfortable with small local banks. Typically, they tend to communicate on a higher level and be more honest about the client’s ability to perform. You want the listing agent to vouch for your lender especially in a competitive situation.
Get Zen on Home Buying
Now that you’ve done the hard work to prepare, it’s time to get in the right mindset. The first thing to know is that purchasing real estate is more of a marathon than a sprint in more ways than you might think. In this market, you’re likely going to be outbid on multiple homes before you find your next property. This is completely normal given the high demand and low supply available. There will be the initial rush of chasing a home you love, but you need to remember, it’s going to be a process. There will be properties you lose out on, and you’ll have to move on to find the next home you love. Expect there to be peaks and valleys along the way and know that your real estate agent is right there beside you to guide you on the journey.
The Long Term of Home Ownership
If you’re considering buying your first property, don’t sit on the sidelines waiting to find your forever home. You need to get in the race. Often people will wait to have enough of a down payment for their dream home. However, the reality is it’s hard to do that when your rent payment is going to something that isn’t going to generate more wealth for you. Instead, take an inventory of what type of property you need for your life today and decide what would be a good fit for your lifestyle. Now you can find a property that will be an asset and not a liability. One of the best ways to approach your real estate journey is to think of it as a series of steppingstones that will ultimately lead you to your dream property. This is a long-term approach and while it may not be how you’ve thought about real estate so far, it can open new doors throughout your real estate journey. For example, you may elect to hold on to that initial property and make it a rental so that you have an additional stream of income. Another potential is to sell it once you’re ready for something larger and use the proceeds as a down payment on the new property. Starting your real estate journey early is going to provide you with a lot of advantages over waiting.
Okay, you have the mindset and you have your team, here are the winning strategies that are helping buyers in 2021. Your real estate agent will be able to help you know when and how to employ these strategies. Just know that it ultimately boils down to differentiating your offer from all the other buyers going after the property. Currently, a strong tactic is to include an escalation clause into your offer. One way to think of it is to imagine an eBay auction. You can tell eBay that you are willing to increase your offer for the item you’re interested in at a specific interval up to a certain dollar amount. The escalation clause works largely in the same way. Your agent can include something to this effect, which helps you stay competitive against other offers.
Other strategies are simpler; however, they are effective at making your offer standout from the rest. Given the tight housing market, many sellers do not have a clear idea of where they plan to go once escrow closes, which can be incredibly stressful for them. Therefore, offer to let the seller remain in the property, rent free, for 30 days while they find their next steppingstone. Now the seller has some piece of mind and you have a relatively low cost way to standout. A third option is to purchase your own home warranty policy. Typically, the first year is paid for by the seller and while it’s not a large sum it could be the one thing that makes you unique when there’s 10 other offers for the same property. The fourth tactic comes with a little more risk but makes the sale easier on the seller. Offer to purchase the property as is. In this approach, the buyer makes it so the seller doesn’t have to pay for and coordinate minor repairs. The buyer takes on this responsibility which streamlines the process for the seller. Now the seller can focus on their move and not worry about small touch ups. This can be a great strategy especially when you plan to do a remodel or make modifications to the property after the close of escrow.
Obviously, this is not an exhaustive list of all the tips and strategies that your real estate agent will have at their disposal to get you your dream property. However, this is a good jumping off point and should give you an idea of how to approach a market that seems to be constantly changing. Contact the Griswold Group to get a more comprehensive and personalized approach so that you can win as a buyer in 2021.
Disclaimer: The materials are provided for informational purposes only and does not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an agent-client relationship between any agent and any other person, group or entity. Furthermore, no representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader’s facts and circumstances.