|Tips to boost odds in a competitive market
Demand for real estate is prevalent in many markets across the country, and one of the challenges that inevitably follows suit is a particularly competitive real estate climate.
All cash offers, offers going for thousands over list price and a continual squeezing between affordability and prices in a given area only adds to the frustrations many buyers face in the market. If you are part of the 99 percent buying a home with financing, the following tips can help solidify the deal.
Price is certainly a factor, if not the biggest factor, most sellers are concerned about. While price is crucial, other factors can add to the viability of your purchase when trying to secure an initial commitment from the seller.
• The right lender: Gone are the days when you could simply get pre-approved to buy a home, use that pre-approval letter to make offers and expect to get into contract quickly. Your loan officer’s reputation in the community is critical, especially amongst the agents controlling the deals. If your loan officer has a trusted name, recognition and a favorable presence in the local market, this can be communicated via the listing agent who has a direct influence on what offer the seller of the property you’re interested in takes.
• Introduction to listing agent: Upon your buyer’s agent (realtor representing you) offer submission, your loan officer calls the listing agent to introduce themselves and explain how well qualified you are to purchase that property on which you are making an offer. There is tremendous opportunity to create a relationship from the financing side in further supporting a strong offer. Many listing agents inevitably call the lenders of the buyer’s whose offers are strong on paper in an attempt, to feel them out about the buyers qualifications. Preemptively, taking this step is a favorable approach that makes it easier for the listing agent to influence the seller to accept your offer.
• The right buyer’s agent: Picking a realtor to represent you in your house hunt can be no easy feat. On one hand, you’ll need a realtor to represent you if you’re going to be making offers on properties listed on the open market. Getting personal recommendations from family or friends is a great start. Another possibility is to explore review sites and pick an agent who has experience and has open-ended honest reviews by other consumers. Ideally, the person you’re going to want representing you is someone who has a reputation of delivering in the local market. This is especially important, as many real estate agents network with each other and work with each other on a regular basis. If your buyer’s agent has a favorable reputation not only in the local community but also with the listing agent in a previous transaction, for example, this is a very good sign that person will influence the seller because they know the offer is strong and they trust the other side.
How you appear on paper: It doesn’t matter if you have $500,000 in income, if you’re buying a home and putting less than 20 percent down. Even if another offer is higher than yours, the offer with 20 percent down still looks stronger on paper amongst agents. The old 20 percent down approach is still king. Granted, you can still buy a house with as little as 3.5 percent down on an FHA loan. And if your offer is higher, that can help offset the perceived lower financial strength indicative of a less than 20 percent down offer.
Additionally, when not requesting a credit for closing costs in your initial purchase offer, this is another approach to take to increase your odds of getting an acceptance from the seller. When you ask for a credit for closing costs based on whatever purchase price amount you are looking for, that results in less net proceeds to the seller at closing…that is, unless you offer a higher purchase price and ask for a credit that way. Be aware, doing so means the house must appraise for a higher valuation to support your higher offered amount with your requested credits for cash to close.
• Less than a 30-day closing: Upon making an offer to buy a property, making an offer for less than 30 days is an aggressive approach, communicating to the seller your financing is lined up and its time to play ball. Know that lenders are up against federal mandatory disclosure time frames and as such have certain thresholds they have to meet in order to be federally compliant with recent regulatory changes. As a home buyer, this will mean you will need to jump through the hoops faster to meet the contractual stipulations. For example, if your lender needs an explanation about your income or they need a bank statement, proactively providing whatever condition is needed from underwriting by the lender within a 24-hour period of time will dramatically aid your lender in helping you close faster.
When you plan to buy a home, having these factors at play when you’re making offers and getting acclimated to the local housing market in your particular area could dramatically increase your odds of getting your offer accepted. Of course, the amount of home you’re approved for needs to be conducive to prices within your given area. But if all of these factors are working in your favor, it is simply a matter of time before youroffer is accepted and can go get your officially underwritten with the lender of your choice.
Scott Sheldon is a local mortgage lender, with over six years of experience helping people purchase and refinance primary residences, second homes and investment properties. Visit him at www.sonomacountymortgages.com.