by Maurie Backman | March 1, 2021
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These three tips could get you into a home sooner rather than later.
Buying a home in today's market is no easy feat. Record-low mortgage rates have led to a surge in buyer demand, and with limited inventory to choose from, getting an offer accepted often means having to duke it out with another buyer.
In fact, getting outbid on a property has kept a lot of prospective buyers from purchasing homes recently. About 40% say that's the primary reason they haven't managed to purchase property, according to a new survey by the National Association of Home Builders. By contrast, one year ago, only 19% of potential buyers cited getting outbid as their biggest impediment to homeownership.
If you're planning to buy a home in the near term, you may unfortunately wind up being flung into a bidding war, and you'll need a strategy in case that happens. Here are a few tactics you can employ to come out ahead when another buyer is vying for the same home you are.
Getting pre-approved for a mortgage doesn't guarantee that home loan will come through. But it does mean you've taken the step of providing a mortgage lender with your financial data, and that lender has determined that upon initial review, you're eligible to borrow a certain amount of money to finance a home.
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When you send a pre-approval letter to a seller, you show that seller you're a serious buyer with the means to make good on your offer. All too often, real estate contracts fall through when buyers can't secure the mortgages they need to finance a home purchase, and that's a seller's nightmare. Having a pre-approval letter could therefore give you a serious edge in a bidding war -- and prompt a seller to say yes to your offer.
The more you're able to cater to your seller's timeline with regard to a closing date, the more likely that seller will be to accept your offer over another. If your seller needs to delay your closing for a number of months, be amenable to that. To accommodate that, you may need to delay the sale of your current home or extend the lease on a home you rent. You may even need to relocate temporarily. But if you can be flexible on your closing date, your seller may value that more than a few extra thousand dollars.
Homes that are competitively priced often wind up in the middle of bidding wars. A good way to avoid one is to offer up an attractive purchase price in the first place. Say a home you want to buy is listed at $299,000. If you offer $299,000, you may find that another buyer comes along to outbid you. But if you offer that seller $309,000 or $314,000 from the get-go, the seller may be happy enough with that offer to accept it on the spot and not entertain other offers.
Getting pulled into a bidding war can be stressful, but it doesn't have to stop you from buying a home that otherwise suits your needs and budget. Take these steps to come out ahead in a bidding war -- or, better yet, avoid getting into one in the first place.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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