We’ve recently discussed in this space some of the tactics buyers can use to compete with all-cash offers in the most competitive markets. However, as an astute buyer, before you get to the point of making an offer it’s important to formulate an accurate outlook on the current realities of your real estate market.
Because as a homebuyer, knowledge really is power.
Beyond basic preparations, even as a first-time homebuyer, here are five insights all buyers should possess before they extend an offer on a property:
Understand current market trends. This is all about setting reasonable expectations as a buyer. It’s very likely 2017 will continue to remain a seller’s market, so it’s critical as a buyer you understand the intricacies of short housing supply, buying competition, making strategic offers without leverage, multiple offers and paying above asking price.
Do your homework. Buyers don’t need to be experts on housing prices and trends; your agent should be the expert. However, as a buyer you should be intimate with the neighborhood you want to buy in and the value it holds. Gain knowledge about what is happening in the area, including proximity to entertainment, local schools, crime data, and even commercial investment. I advise buyers to visit a prospective neighborhood at different times on different days of the week to gain a good feel.
Be realistic about listing prices. The true value of a home is the price it will fetch on the open market. Sellers want a good deal just as much as buyers, and they most often own (literally) the leverage. Would you entertain low-ball offers as a seller? I always advise buyers to put their best foot forward based on the known factors of (1) seller motivation, (2) competing offers and (3) market conditions. Don’t lose a property you want over a small percentage of the list price.
Know the value of what you’re buying. Understand the neighborhood and the impact it has on home prices, both past and present. Educate yourself on property details so that you can spot an under-priced home or one that has been sitting on the market too long. If you really understand the true value of a property, even if you have to overpay to acquire it, it can still be a wise long-term investment you would otherwise regret missing.
Be serious, and be ready. Every buyer should ask themselves: Is acquiring a property the end game, or is getting a good deal? If you beat out all of the competition to get a property you desired, that’s the win. Work with a known and trusted lender, get written pre-approval on a mortgage and be in constant communication with your agent about your search. Being in position to submit an offer at any time decreases the risk of losing out on a property for reasons you could have controlled.