Real estate has outranked stocks/mutual funds, gold, savings accounts/CDs, and bonds as the best long-term investment among Americans for the last 5 years.
With the Seattle real estate market defying every housing market trend – a huge problem remains: there are more people looking to buy homes than there are homes available for sale.
With Seattle’s population rapidly growing recently thanks in part to large homegrown businesses like Amazon and Starbucks.
Home values in King County, which is where Amazon is located, have appreciated twice as fast as the national average.
Notwithstanding that the current Seattle market has remained a seller’s market for some time now, Seattle homeowners are still hesitant to sell.
So, what’s a home buyer to do when the market offers them no relief?
There are a few strategies that a potential home buyer can do to not just set them apart from their competition, but help them land the home they dream of.
Follow these home buying best practices and own the home meant for you:
1. Timing is key
a. If you are able to be flexible with your timeframe, let the seller know that you are willing to move as quickly — or as slowly — as they need. If the seller is looking to close their home within 30 days, they won’t be very interested in an offer from someone who won’t be ready to move for 60.
b. Do anything you can do to speed up the buying process and make it easier for the seller. This includes getting a pre-inspection.
c. Get prequalified by a home lender. Pre-qualifying yourself for a loan demonstrates to the seller that you have been vetted financially and details how much mortgage you can afford.
2. Add an escalation clause to your offer
If you want to compete with multiple offers on a home, the best weapon you’ll have in your offer will be using an escalation clause. This will help the seller measure how much more you are willing to pay over another competing offer.
3. Make it personal
When a home seller faces multiple offers, receiving a personal letter from a home buyer can help set that offer apart. Yes, many sellers will just go for the highest bid. However, if the home seller has an emotional attachment to the home, pulling at their heartstrings might just help you land the property.
4. Cash still talks
Make your offer irresistible by contributing more money up front in the earnest money deposit. Earnest money is cash provided by the buyer, ranging from 1% to 5 % of the purchase price, that gets held in escrow until the sale finalizes. Earnest money usually acts as insurance for the home seller in case the buyer backs out of the deal.
Were you able to purchase a home in a seller’s market? Share your experiences in the comments below!
Even if you’re a first time home buyer, you too can learn how to house hunt with confidence and with as few surprises as possible.
Take a look at my top first-time home buyer tips and gain the knowledge you need to help you take the right steps.
1. How much home can you afford?
Unless you have the finances to purchase a home in full, chances are you’ll most likely need a home loan called a mortgage to help you buy a home.
A mortgage is a loan that a bank or mortgage lender provides an individual to help finance the purchase of a house. It’s beneficial that you borrow approximately 80% of the value of the home or less. The house you buy acts as collateral in exchange for the money you are borrowing to finance the mortgage for a house. A mortgage payment is comprised of four parts: principal, interest, taxes, and insurance. It’s usually paid on a monthly basis.
So, What price range can you afford? Well, That depends on your income, lifestyle, location, and other variables.
However, in general, experts recommend that your house payments including, mortgage, maintenance, and taxes not exceed 28% of your gross monthly income.
For instance, if your monthly (before-tax) income is $4,000, multiply that by 0.28, and you’ll get a sum of $1,120.
This sum should then become the guideline for what you should spend a month on your home expenses.
For a more accurate assessment of what your home budget would look like, head on over to a lender for mortgage pre-qualification. When you pre-qualify yourself for a home mortgage, a bank assesses your credit history along with other factors and provides you with a Mortgage estimate. This will then enable you to save time by giving you a guideline of homes that will be within your budget and puts home sellers at ease, as it proves you have the cash to back up your offer.
2. Choose the right Realtor
Buying a home isn’t as simple as falling in love with a house and submitting an offer– You have to transfer a deed, title, along plenty of other paperwork involved in the home buying process.
You have to have home inspections, negotiate contingencies, and have a reliable network of professionals ready to help the process run smoothly and efficiently.
A trustworthy and knowledgeable Realtor by your side can be an incredible asset to your home buying process guiding you to make the best decisions at every step.
Make sure to find an agent familiar with the neighborhood in which you’re planning on purchasing in as the Realtor will have a better idea of proper expectations and realistic comparable prices.
3. Be prepared
Once you fall in love with a home and have an offer that’s been accepted, you may be eager to move in. Be cautious in your excitement. A home is a huge investment and one you shouldn’t just jump into. Don’t purchase a home without doing your due diligence and without adding contingencies to your contract– Contingencies allow for you to back out of the deal if something goes wrong.
The most common contract contingency is the home inspection, which allows you to request a resolution of issues (Example: leaky roof or weak foundation) found by a professional.
Most importantly: Be sure always to add a financing contingency. Financing contingencies give you the right to back out if the bank doesn’t approve your loan. Pre-qualification makes this potentiality less likely, but it is not a guarantee.
You also might want to consider an appraisal contingency, which also lets you leave the deal if your lender values the home for less than what you’ve offered. At the point, the last thing you’ll want to do is scramble to come up with out of pocket to make up the difference—a terrible gamble if cash is already tight or already tied up in the home buying process.
Buying a home for the first time can be a nerve wrecking and lengthy process. Be prepared by educating yourself on the processes and surrounding yourself with top notch professionals that will help guide you make the right choices.