The process of buying a new home and putting down firm roots should be one of life’s most exciting milestones. Lately, it’s felt more like going to war.
With demand strong and supply agonizingly low, buyers in many U.S. metros have gotten used to fierce bidding wars where it feels like you have to give up your right kidney to actually win.
Are would-be homeowners destined to fall into a cycle of losing offers and feelings of dejection? Thankfully, no. Here are some expert tips to help you stay positive and gain the upper hand.
1. Adjust your expectations
These are crazy times for the housing market, without a doubt. Nationwide, the median time on the market for properties is near historic lows. In many places, bidders are offering thousands of dollars above the listing price just to have a chance.
So going into the process based on your idea of a good deal two years ago — or even two months ago — isn’t going to work. “You need to be realistic about market conditions where you’re going to buy,” says Boston-area real estate agent Dana Bull. Setting yourself for disappointment is never a winning tactic.
2. Have faith in your agent
At the end of the day, the buyer is the one in the driver’s seat when it comes to making offers and securing financing. But people who have bought or sold in previous markets sometimes think they know best about pricing, even if their reference is woefully outdated.
During a cutthroat housing market, it’s all the more important to trust the advice from a professional who’s immersed in the industry and knows what it takes to win bids, notes New York City real estate broker Gerard Splendore. “The ability to communicate and develop a good working relationship with the agent representing them is absolutely crucial, especially in today’s extremely competitive environment,” he says.
3. Don’t have too many cooks in the kitchen
When you’re making one of the biggest financial decisions of your life, it’s only natural to seek advice from a network of family and friends. But getting too many people involved during your search can lead to a lot of conflicting input.
Bull says you can create a small circle of loved ones to help in the process, but they have to be fully invested. “Just make sure they’re involved in the beginning so they understand the hard decisions you need to make and can support you in those,” she says.
4. Do your research in person
Home-shopping in the digital age offers a lot of advantages, not least the ability to scroll through a series of photos and narrow in on the homes you like. But pictures alone don’t tell you the whole story about a property — how the rooms flow together, what the neighborhood looks like, and so on.
That’s why you really need to get out and see as many homes as you can. “Every property that you look at is a case study in value,” says Bull. The more you look at the better your sense of what a good deal looks like.
But that doesn’t mean using a shotgun approach, either. Buyers should ideally make a list of their “must-have” features so they’re putting their time and energy into properties that are real contenders, advises Dorothy Schrager, a broker in New York City. “Don’t waste time trying to see every property on the market because when you see the right place, you’re going to be distracted,” she says.
5. See listings as soon as possible
With many sellers accepting offers in less than a week, Bull says it’s incumbent on seekers to get in and look at a home as soon as they can — ideally, that’s the weekend when it’s first listed. “Sometimes these offers don’t even go to the deadline,” she says. “I want clients to at least have the opportunity to compete.”
Plus, the sooner you get in, the sooner your agent can perform their due diligence. That could include a whole list of things—researching zoning for nearby land, talking to neighbors about the pros and cons of the area and looking for any permits that the previous owner has pulled. The more information you have about the home before making a bid, the more confident you’ll be.
6. Ask what risks you’re willing to take
Sellers are in an enviable position these days, often having the luxury of choosing from multiple offers above their listing price. They generally try to minimize the odds of an offer falling through, which means they may not take you seriously unless you forgo protections like home inspection and appraisal contingencies.
Obviously, that creates certain risks, so you have to know where your red line is. By waiving an upfront home inspection, for example, you could open yourself up to expensive repairs that weren’t obvious during the showing.
And if you waive the appraisal contingency, there’s always the possibility the valuation will come in lower than your bid, forcing you to make up the difference in cash. That can happen more frequently when prices are trending upward since professional appraisers look at past home sales when doing their calculations. “It’s not that the property isn’t worth it,” says Bull. “It’s that the data is lagging.”
7. Have your financing ready
“The buyer in a hot market has to be prepared to move quickly, and that means having all your ducks in a row,” says Schrager. A big part of being prepared is talking to lenders and having a commitment letter that you can show the seller’s broker.
In the past, being able to whip out a pre-approval used to put you on pretty solid footing. But these days, you’re in even better shape your loan is pre-underwritten, which means it’s further along in the process. “It minimizes the risk of any surprises,” says Bull. And your loan can typically close faster, to boot.
8. Know that good deals still exist
When every house you look at is getting a number of strong offers, it can seem like going way outside your budget is inevitable. However, Bull says finding a good value isn’t a pipe dream, even now.
Sometimes the seller’s broker may not be particularly responsive, so they’re not getting the offers they otherwise would. Or the property may have a dated look that an imaginative buyer can transform into a gem. That’s often when you can snag a much better price.
“Most people want everything showcased in a way that’s exciting,” says Bull. “If you can train yourself to look beyond the smoke and mirrors of great marketing, then you can still get a great house.”