Believe it or not, the pandemic has created a unique situation where many markets are experiencing multiple-offer situations on properties for sale. If you’re going to get pre-approved or begin looking for a house, here is what you might want to be aware of and what you can best do to position your chances of getting into contact to buy a house…
Big picture: some states have had severe lockdowns. California, for example, being one of them, is experiencing multiple-offer situations on housing right now. If we rewind the clock back to March 2020 when the lockdown began for the broader United States, housing went on pause temporarily, people were furloughed from their jobs as the COVID-19 pandemic began to take shape. Over the course of the last 30-60 days as some states have reduced lockdowns and have gone into different phases of reopening, people are now back to work. Employers have changed many different positions where people who are commuting to work every day now can permanently telecommute from home. As a byproduct of this, many of these families have begun relocating to more affordable areas.
One such particular example of this is the Northern California Market in the Bay Area where many of the tech jobs required in-person work now have been a transition to full-time telecommuting giving these people the ability to now live wherever they desire. Making $100,000 a year for example in San Francisco doesn’t go very far; however, making $100,000 can go a long way in more affordable areas such as Sonoma County, Ca.
Also, interest rates are extremely low which is working in tandem with people’s incomes and livelihoods and where they’re going to ultimately end up being due to the COVID-19 pandemic. People who are previously pre-approved before the COVID-19 pandemic and at 4.25 mortgage rate, are now finding themselves getting something around the 3 percent or lower for the same 30-year mortgage. One percent in interest rate can easily translate to, in some cases, as much as $75k of spending power. So everyone is converging on the housing market right now because of rates and incomes being reinstated as a byproduct of being back to work.
So what do you do if you’re pre-approved and you keep missing out on opportunities? You make an offer on a house and all of the sudden by the time you hear they’ve reviewed offers five or eight other people have put offers in and they’ve beaten you out- how do you make yourself stand out?
Well here’s how…
1. Make sure you are really serious. In other words, make sure the lender can guarantee the loan. If they cannot guarantee the loan, move on. This is not the market to play games especially when the competition is fierce. You need to have your ducks lined up if you want to be a successful home buyer.
2. Do work with a local lender. Work with a local lender, potentially even a non-bank, why? Banks are interested in one thing: margins and appeasing shareholders. A local non-bank lender is going to be far more motivated and driven to make sure they meet critical dates on your purchase contract. It is even better if the local lender knows the listing agent and there is already a relationship there or a proven ability of performance. Remember, real estate is a very local game.
3. Have your loan professional call the listing agent upon submission of your offer and let them know they will receive updates throughout the process. Hopefully, your lender knows how to do purchase business and they can convey to the listing agent when your appraisal is ordered and back, when your file is in and out of underwriting, and when your file is clear to close. You want your lender to make it easier for the agents. This will help tip the scales in your favor as a home buyer.
4. Do not ask for seller credits you do not need. If all you have is just a down payment to work with for purchasing a house then by all means ask for a seller credit for closing. However, if you have the money for closing costs via your own savings, or your retirement or family gift money, for example, exhaust those efforts first. Remember when you ask for a seller credit for closing costs on a home purchase that weakens your offer to some degree as those monies transfer from the seller’s pot to your pot.
5. Stop low balling or asking for additional credits to take place beyond the seller credit for closing costs. The house may need $10,000 worth of work. Many times home inspectors will tell you that house needs XYZ amount of work to be done, however, a lot of the time the work can be done over the course of time. There’s nothing saying it has to be done immediately to close escrow on the house, for example, $10,000 in purchasing power on most mortgage loan programs only translates to about $125 a month. If $125 a month of payment is going to make or break your decision to purchase a house, you probably should not be purchasing a house anyway.
6. Include a photo of you and your family and a desire to purchase the house and why you like the house and how you will take care of it and try to appeal to the seller on an emotional level. This can go a long way when multiple offers come into play, contrary to popular belief, not all home sellers are driven by price alone.
7. Tailor your offer to the motivation and the reasoning behind why the seller is choosing to sell their house. Have your real estate agent call up the listing agent and find out why they’re selling their house, maybe they’re selling their house because of a death in the family so you present your offer in a very gentle, nurturing and compassionate way. Align your purchase with whatever the pain and the motivation of the seller is.
By doing these things identified above each time you make an offer on a house it only becomes a matter of time. You have to go through the process and in some cases and in some markets part of the experience of buying a house is making multiple offers upon multiple offers to get your foot in the door to get into contact.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.