Bidding Wars, Housing Shortages, and Desperate Buyers: How to Manage Home Buying This Spring
After looking at more than 50 homes and writing 17 offers, Taryn and Antonio Orellana recently closed a home in Lakewood, California.
Source: Taryn Orellana
When living in a pandemic felt too cramped in the one bedroom apartment that Taryn Orellana shared with her husband Antonio, she knew they had to move.
In October, the couple decided to buy their first home in Lakewood, California. It was harder than I thought.
“There were times of desperation when we made offers on homes and we weren’t even sure if this was the right thing,” said Orellana, 37, a nurse.
In total, the couple saw more than 50 homes and wrote 17 offers before one was finally accepted. They turned down nearly a dozen other offers, beating the asking price by about $ 40,000. They also exceeded their original budget by about $ 70,000, she said. Fortunately it worked and the orellanas have happily settled in.
Your experience will become the norm thanks to the limited supply of homes for sale across the country.
There are now about twice as many real estate agents as listed houses.
“I’ve been in business for more than 30 years and have never seen a market this hot,” said Glenn Brunker, president of Ally Home, which provides mortgage services and products.
He often recommends taking a break and doing a little soul searching.
“Look at your income streams, your employers and the location where you want to buy a house, and make sure that the stability of your personal situation justifies home ownership,” said Brunker.
When you’re ready to buy, here is expert advice on how to navigate the market now.
Find out your budget
Get pre-approved for a mortgage
Pre-approval for a mortgage gives you an idea of how much you can borrow, what your interest rate is likely to be, and what your monthly mortgage payment is.
Just because you’re approved for a certain amount doesn’t mean you should be spending that much money.
“The only person in charge of your budget is you,” said Lexie Holbert, a home and lifestyle expert at Realtor.com.
Do your homework
SDI Productions | E + | Getty Images
Check out online deals, including virtual tours, even if you’re not ready to begin the process. It gives you an idea of neighborhoods that you like and that are within your budget, suggests Holbert.
Setting up notifications from real estate websites will also tell you when new homes are coming in these areas.
When you see houses that you like, a mortgage calculator offered by lenders can help you find your monthly payment based on the down payment and the cost of the house.
A good knowledge base will help you make an informed decision in a short period of time. This is vital if homes haven’t been in the market for long.
Get a good real estate agent
Part of your due diligence will be to find a real estate agent who is experienced in both buying and selling homes. You should also have a strong knowledge of the local community and relationships with other realtors in the area.
“They want them to be able to bargain hard and know what makes a competitive deal in this neighborhood,” said Holbert.
Assert yourself against the competition
To attract a salesperson, try to develop a relationship with them. This can range from writing a heartfelt letter to having your real estate agent paint a positive picture of you as a buyer.
“If you can connect with the seller emotionally through the broker or as an individual, it makes a difference,” said Brunker.
Prospective buyers visit an open house for sale in Alexandria, Virginia.
Jonathan Ernst | Reuters
First time buyers can have an advantage in not having to depend on selling a previous home to buy the new one and having flexibility in when to move in. One option is to rent the home back to the seller while looking for their new home.
While some buyers forego inspections, Brunker does not recommend this tactic because an unexpected repair can get you in financial trouble.
If you are able to process a larger down payment, you can forego the valuation facility, which allows buyers to withdraw if the home is valued for less than the purchase price. Your mortgage amount will decrease and you will have to make up the difference.
“Removing contingent liabilities shouldn’t be done by everyone,” advised Holbert.
“Talk to your agent about the specific situation and make sure you understand the risk.”