Attempting to purchase a house in a market where inventory is low and prices are rising can make the already complex process of buying a home even more overwhelming. The National Association of Realtors offers the following suggestions to help buyers get through the buying process in a tight inventory market:
1. Determine and stick to a budget. Before beginning the house hunting process, prospective homebuyers should receive pre-approval from one or more lenders to verify the amount of money they are qualified to borrow. Then, after taking into account additional costs of ownership such as taxes, utilities and insurance, buyers should determine a final budget they can comfortably afford. When listings are scarce, bidding wars can drive up prices, so buyers must be prepared to walk away if the asking price surpasses their budget.
2. Identify desired neighborhoods and home wants versus needs. When inventory is tight, buyers may need to compromise on what they believe they want from a home. Certain wants, such as stainless appliances or hardwood floors, can be added later. However, if a buyer wants to be in a specific school district or have a decent sized backyard, those cannot be addressed later and must be taken into account during the house hunting process.
3. Be ready to make a decision quickly. In a seller’s market, homes rarely stay on the market long, so when a house that is in their budget and checks off all of their needs comes along, buyers should be ready to submit an offer quickly, or they may risk missing out on the home altogether.
4. Bid competitively and limit contingencies. In a seller’s market, buyers need to put forward their highest offer from the very beginning, or they are likely to lose out on the home. Also remember that in multiple bidding situations it is not always the highest offer that is most attractive to the seller but the one with the fewest contingencies. Removing restrictions related to the sale of a current home and being flexible with things, like the move-in date, can make a bid stand out to a seller.
5. Work with a realtor. All real estate is local, so it is important to work with an agent who is a realtor and who is familiar with the areas and neighborhoods homebuyers are considering. With their unparalleled knowledge of their communities, Realtors can give buyers the competitive advantage needed in a tight market.
“People use the terms realtor and real estate agent interchangeably, but that is incorrect. There are differences between realtors and real estate agents. Although both are licensed to sell real estate, a realtor is a member of the National Association of Realtors and bound to a professional code of ethics and business practices,” said Denise Welsh, president of the Silicon Valley Association of Realtors. “Realtors are required to undergo additional training in current business practices, so the standards for realtors are higher.”