It’s no secret that the housing market has seen a dramatic influx in value over the last two years. Home prices have skyrocketed, and foreclosures are at an all-time low. So, is now a good time to buy a home?
The answer to that question depends on your circumstances. In this blog post, we’ll provide some tips for buying a home in a seller’s market.
Know the Market
There are bargains to be had, but you need to know what’s out there before making an offer. You should start with a local real estate agent who can guide what types of properties are available in your price range and which ones represent the best value based on their location and condition.
Doing some online research is also helpful for identifying properties before they hit the market. Buying a home in a low-inventory market requires patience and determination, so know going in what you’re willing to accept and don’t deviate from your plan.
Do your Research
It’s important to find out how much other homes in the same neighborhood are selling for, which can give you an idea of a fair price for the property you’re interested in.
You can also ask your realtor to research recent sales of homes that have sold nearby, which will give you a baseline comparison for how much similar properties have recently been selling for. Many online resources will provide this information, such as Zillow and Trulia, so utilize these tools if you don’t have a real estate agent to help.
Not only can a real estate agent help you do research, they often handle negotiations and can potentially save you thousands of dollars. Depending on the market, you may need to find an experienced real estate agent first.
Markets that fall into this category include Austin, Texas real estate; Phoenix, AZ real estate; and Nashville, TN real estate.
Know what you can Afford
Don’t stretch your finances too thin to buy a home, as it could come back to bite you later on. Try to keep your total monthly debt payments (including the new house payment plus all other outstanding obligations) at or below 36% of your gross monthly income. This will help ensure that you don’t take on too much debt.
Good to excellent credit is an important factor when buying a home, which means you should do everything possible to maintain good credit over the next few years. Regularly make on-time payments for all your bills and accounts, don’t carry large balances on your credit cards, and stay away from high-interest rate loans where you can.
Also, be sure to check your credit report before making an offer on a property. You can get one free copy of your credit report each year from AnnualCreditReport.com, and it’s recommended to get several more copies over the next few months to see if anything negative has shown up (and ask for any errors to be corrected).
Have an Inspection Done
Inspections are an essential part of the home-buying process, as they allow you to uncover problems with a property that might affect your decision. Have a professional inspector come in and look over the property to ensure there’s nothing majorly wrong.
You can also ask for a sewer scope or test, so you know about the condition of the septic system on the property. Also, you may want to consider getting an appraisal done, as it can help give you additional insight into the property’s value.
Avoid the Extras
Don’t be tempted to buy furniture, appliances, or window treatments when you make an offer for the house. You should wait until after closing to furnish the home, as it’s better for negotiations if you don’t bring in more money than necessary at that time. On top of that, most moving expenses are not reimbursed by the seller, so you’ll likely be on your own in terms of transportation and storage costs if you buy too much.
Stick to a Realistic Budget
We get it, you want to get the most house possible for your money. But buying a home that costs more than you can afford means you’ll have to borrow funds from a lender at a higher interest rate and pay interest on that loan going forward.
Don’t let your emotions cloud your judgment when deciding how much of a monthly payment you’re comfortable with, as the best deals are ones that don’t leave you totally stressed out each month.
Make sure to negotiate on price before agreeing to have any work done on a property (e.g., making repairs or upgrades), as those labor costs will usually be included in your closing costs and added to the overall cost of the property. If you’re planning to make any updates or repairs, try putting together a list of all your desired changes and showing that to the seller before closing. This may help you get a lower price on the property because you’ve shown what needs to be done for the home to meet your standards.
Using a Mortgage Broker
You should be pre-approved by a lender before shopping for a home, but this doesn’t always mean you’ll get the rate you want from them. It’s smart to have a mortgage broker look into getting you an even better rate so you can afford the home of your dreams.
They can also help you determine how much of a mortgage you qualify for, which will play an important role in whether or not you’re able to buy that house.
Avoid a Bidding War
A bidding war can drive up the cost of a home, which is why you want to avoid getting into one if possible. Make your offer as soon as possible, so you know you have first dibs on the property, and be willing to walk away if the asking price is too high for what you can afford or what you’re looking for.
Also, if you have your financing in place, don’t delay when making an offer, so you have the best chance at scooping up the house.
Don’t be Afraid to Walk Away
Don’t get emotionally attached to a property because you’re under contract. If we think the asking price is too high, we will tell the sellers and work with them to get an agreeable selling price. The same goes for if we think there are problems with the property that could be costly and/or time-consuming to fix. Our advice is always in your best interest.