If you are currently trying to buy, or are thinking of buying, you have undoubtedly heard how hot the housing market is and how difficult it can be to find a home.
Why is this? Several factors: a stable economy, population growth, growing popularity of Denver, Millennials entering the hunt for a home (America’s largest generation), low unemployment, low inventory, and current homeowners are staying put on average almost double the time as a decade ago.
Before the housing bust, people were moving every 4-6 years into new homes keeping a steady flow of houses available for purchase. Now, the latest data shows us people are staying in their homes on an average of 8.6 years. People are weighing the cost of moving since inventory is low and the process is slow, and if they will have to trade in their low interest rate for a higher one.
The meat and potatoes of the real estate business, people selling and buying from an agent, is changing too. Due to a healthy economy and increase in real estate values, more and more people are deciding the keep their current homes as rentals and buy a new home for themselves. Although this is a great investment move, it is taking a toll on the inventory in the market.
So how do you get a leg up on the competition when it comes to buying? Here are a few tips that will help you become a more prepared and attractive buyer in a seller’s market:
- Plan early and often
- Home buying is a process and the more you plan ahead, the more money you will save in the long run. Get with a lender to check your credit scores and work on getting them as high as possible.
- Get educated about the best loan program for you
- There are many different programs out there that can benefit you, even if you aren’t a first time home-buyer.
- For example, if you have good credit, a 3% down conventional loan might be a better deal for you than choosing an FHA loan
- Gather the biggest down payment that you can
- Sellers seem to be more attracted to larger down payments as well as conventional loans vs. FHA
- Get pre-approved
- When you make an offer, agents and sellers alike want to know if you are pre-qualified for a home loan, and even better yet, pre-approved. This process isn’t hard, just sit down with your lender who will get specific details from you about income and debts etc. and from there, they can send your agent a letter of your status to include when you make an offer.
- Be flexible on the parts of town
- Because of low inventory, you will need to look outside your favorite one or two neighborhoods. Take into account what the longest commute to work you are willing to drive is and search everything in between.
- Be flexible on taste
- Because of high prices and low stock, you will probably need to adjust what you want in a home. Don’t be intimidated by ugly carpet and cabinets. Asses that getting into a home that you can change to your liking over time is better than not getting into one at all or spending more later as prices continue to rise.
- Be prepared to act fast in making an offer
- As soon as something comes on the market, the quicker you can see it the better, and the quicker you can make an offer the better. It is not uncommon in the Denver metro area for properties to only be active for 24-48 hours before the seller has accepted an offer. In this hot market, buyers often times don’t have the time luxury to mull things over like they have had in previous years.
- Don’t be discouraged if it takes 3-8 offers to land a sale
- It should be expected that most properties for sale will have multiple offers and so more than likely it will take you putting in offers on multiple properties. Talk to your realtor about ways to spice up your offer also. Common ways seen today is adding an escalation clause, appraisal waiver, cash offer etc.
- Plan ahead with your landlord on lease flexibility
- If you are renting and trying to buy something, working around when your lease is up can be very difficult, especially if it takes 3-6 months to find a home to buy. Talk with your landlord about maybe going month to month or what the cost of breaking your lease would be.
- Be patient and embrace the process
- In such a crazy market, you need to mentally prepare yourself that buying a home will most likely take a while. You could start looking, find a place, make an offer and get the keys to your new home in 45 days, but than likely this will not be the case. It could take several months to get an offer of yours accepted and the deal could still fall through if you aren’t comfortable with the inspection results, or appraisal results etc. Remind yourself once you do go under contract it usually takes an additional 30-60 days to close your loan and get everything squared away before you are handed the keys. Remember, it will be worth it in the end! Hang in there!
If you have any questions about the current housing market, loan process, or what you can do to be more prepared, feel free to give me a call and I would be happy to give you some advice!
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