Strategy helps make the best purchase
Every war needs good strategies and the real estate war is no different. Even the definition of strategy - “a high level plan to achieve one or more goals under conditions of uncertainty” - fits real estate purchasing to a tee.
Last week we spoke about pricing strategies for sellers and the effect of potential buyers being “anchored” to a listing price and/or a special feature of the property. This week in fairness we’ll talk about buyer strategies and methods to get a fair price for a piece of property without being outbid.
Buyers have been having a rough time of it - prices are going up, mortgage rates are going up and inventory has been scarce. All of this has resulted in multiple offers on properties and according to Redfin, a real estate website, in June, 69 percent of homes on the market nationally had multiple offers.
So what’s the best strategy for buyers in this market? Some of this may be helpful.
For years, I’ve been preaching that the single most important thing a buyer can do is to get prequalified, and I don’t mean preapproved, I mean prequalified. The difference is that you have essentially made application to a lender, provided them all of your documentation including income, assets and debts and they have told you in writing what size mortgage you qualify for based on the size of your down payment and prevailing interest rate. This gives you the highest level of credibility possible to a seller. Watch the interest rates - if they continue to go up you may need to be prequalified again.
Next, make realistic offers. In an escalating market you can’t afford to feel out the seller and certainly don’t insult them with a low ball offer. Coming in with your maximum or close to maximum offer at the beginning will put you out ahead of other buyers especially if this is the number you already decided you would pay for the property. As part of this strategy you also need to know what your top number is if it wasn’t your opening bid and be willing to walk away. Don’t get caught up in being “anchored” to the property at a number you’re not comfortable with.
Be flexible on terms outside of the sale price. For example, work with the seller on closing dates and other moving arrangements including the possibility of sellers renting back after closing if for some reason they can’t vacate the property. The better you connect with the sellers on a personal level the stronger position you will be in.
It’s also very important not to delay when you find a home you like. Get out in front of the crowd and make an offer quickly and continue negotiating as fast as possible.
Do research in your target area by scrutinizing one of the real estate websites like Realtor.com, Trulia and Zillow to analyze properties in your price range. Many local real estate companies’ websites will also provide access to properties listed on the Multiple Listing Service and municipalities also have online public records where you can check on sold prices.
Finally, make your wishes known either through your broker or directly to the seller that you want to be considered as a backup on a property where you may have been outbid. There are a lot of reasons real estate transactions never come to fruition frequently because of low appraisals in a market that is moving up quickly.
Attempting to purchase real estate for a fair price may seem like you’re in a war, but remember the seller isn’t your enemy. Figure out the best strategy for you and stick to your guns, so to speak.