The spring months have traditionally represented the start of the busy home shopping season in the Northern Hemisphere. With the abundance of warm sunshine, lush greenery and budding blooms, sellers can show their homes to full advantage, and prospective buyers are coaxed outdoors to start house hunting. In 2022, the spring selling fervor is heating up to be especially intense.
But for many buyers, a successful home search still involves fierce competition over homes selling for top dollar. Prospective buyers are contending with a number of challenges including low inventory, multiple bids, steep prices and mortgage rates that, although still historically low, have been on the rise since March. Although there are grounds for optimism that a more balanced housing market will emerge over the course of 2022, buyers can approach their home search with confidence and help tip the scales in their favor right now by starting with these strategies:
Get pre-approved for a mortgage before you start house hunting
In this fast-moving environment, it’s critical that you get preapproved for a mortgage before you start serious house hunting, unless you’re prepared to make an all-cash offer. A pre-approval letter demonstrates that a lender has already done a fairly thorough investigation of your finances to determine your eligibility for a loan up to a specified amount (subject to conditions). Understandably, sellers prefer to deal with buyers who have taken this step to demonstrate that they’re serious about buying, and can likely afford the home. In hot housing markets, many sellers won’t accept offers from prospective buyers without a pre-approval letter. So, if you’ve neglected to take this step, there’s a high chance you’ll lose out on a home you want as the seller entertains multiple bids from those who would appear a safer bet.
Establish what’s most important to you in a home
Not only does mortgage preapproval establish your credibility as a serous buyer, but it also gives you a clear sense of how much home you can afford so you can negotiate with self-assurance. When you have a firm budget in mind, you can determine your housing priorities as well as the areas in which you’re willing to compromise. For instance, maybe a top-tier school district and four bedrooms are essentials for you, but perhaps marble counters and a steam shower fall under your category of desired features that you’re willing to forego until you’ve gotten settled and are ready to do some remodeling.
Work with a highly-qualified agent who knows the local market and has your best interests in mind
An effective real estate professional with solid expertise and deep knowledge of the specific communities where you’re considering buying can be a critically important advantage when it comes to the home buying process. Ideally, this person should have a good sense of sales prices and how quickly homes are selling in that particular locale, and can provide insight into neighborhoods, schools, facilities, zoning rules and more.
While you can work with a listing agent when buying a home, a buyer’s agent can help you to create a quick and compelling offer based on your needs. A buyer’s agent can also negotiate strongly on your behalf, and guide you through the sales process to avoid mistakes and delays that can cost you money, or cause the transaction to fall through. As Zillow points out, it’s helpful to start working with an agent early in the home buying process, since agents may learn about homes going up for sale before they’re listed, and may be able to arrange for viewings before others buyers get word of them.
To ensure that you work with a reputable agent who will best represent your interests, ask friends, family members and others you trust for a recommendation. Other real estate agents can also be an excellent referral source, as long as they are not competing for your business. It’s also a good idea to conduct a brief interview with a few different agents to get a better sense of who would be the best fit. Find more tips on “How to Find the Right Real Estate Agent for You” at NerdWallet.
Boost your offer with a larger deposit
If you can access the funds, it can pay off to be generous when it comes to your earnest money. Like mortgage preapproval, a larger initial deposit is perceived more favorably by sellers. It communicates that you’re motivated to buy, and it demonstrates goodwill.
Generally, earnest money is applied to your loan’s closing costs or to your down payment. If you withdraw from the deal for a reason not covered by a contract contingency, the deposit can be forfeited to the seller. But as Realtor.com points out, buyers can often get their money back if problems are discovered with the property, or if the buyer cannot obtain title insurance. Find an overview of how earnest money works and how to protect your deposit at ConsumerAffairs.
Be prepared to act fast
In a tight housing market, you’ll want to move quickly to make a competitive offer on a home you want to buy, becomes they don’t stay listed for long. According to data from the National Association of Realtors (NAR), homes spent an average of just 18 days on the market in February 2022, compared to 20 days in February of 2021. And during the peak selling seasons of spring and summer, homes tend to spend fewer days on the market before going under contract, as compared with the colder months. With homes selling at an accelerated pace, try to view them as soon as they become available, instead of waiting for weekend showings. It’s also best if your agent prepares your offer as the seller expects to see it, so you don’t lose time preparing a counteroffer as the seller reviews other offers.
Flexibility can get you far
Keep in mind that you can improve your chances of having your offer accepted over others that are similarly priced if you’re able to offer terms that are more accommodating to the seller’s needs. For instance, you might be able to offer the seller additional time to buy a new home and move out through a sales-leaseback arrangement, or allow the seller to leave behind certain items that are difficult to move. If you have a lender that will afford you a more aggressive escrow period, a quick closing date might help you clinch the deal. You might also offer to cover all closing costs. Another possible option is to consider waiving or limiting certain contingencies, but experts caution that this should only be done with the recommendation and council of a trusted real estate professional.
Getting ready to buy your first home and seeking expert advice and guidance before you head out on the market? Be sure to mark Thursday, May 19, 2022 on your calendar! In partnership with GreenPath Financial Wellness, The Police Credit Union is hosting a no-cost, educational Home Buying Workshop for new homeowners from 12 p.m. to 1 p.m. You’ll learn how to prepare to purchase a home, and the steps you’ll take once you’re ready to start the buying process, from application to closing. Click here to register.
In addition, The Police Credit Union is proud to introduce our signature H.E.R.O. (Helping Enable Residential Ownership) Mortgage Loan with 100% financing for first-time homebuyers. Available exclusively to our active law enforcement members, this 0% down payment option features no PMI (Private Mortgage Insurance) requirements, loan limits up to $1,000,000* and a quick approval. Find details and apply here.
Program available to first-time homebuying members of the credit union that are an active full-time sworn peace officer or reserve peace officer employed by a federal, state, county or municipal agency. Program consists of a fixed or variable rate 1st and a fixed 2nd mortgage. Property must be located in California, and be owner occupied. First time home buyers may not have had ownership in a principal residence during the preceding 3 years. All loans subject to credit approval, documented income and reserve requirements. There is a non-refundable application fee of $95 for this program that will be credited back at closing. Additional terms, conditions and restrictions apply. Program is subject to change or cancellation without notice. Contact your TPCU Loan Officer for terms, rates and full details. Federally insured by the NCUA. Equal Housing Opportunity. NMLS #: 409710
*Maximum loan limit may go up to $2,000,000 for qualified applicants, amount is for the total combined amount of the first and second mortgages.