If you were looking to buy a house during the pandemic, you know that the market has been extremely challenging for homebuyers.
Due to mandatory stay-at-home orders, countless lockdowns and economic shut downs, Americans were spending a lot more time at home. As a result, people began to value space and larger properties much more, and many buyers were motivated to trade their smaller home for more space.
In no time, these behavioral changes – coupled with a growing interest in home buying from investors – caused a housing shortage in the market. As more buyers poured into the market, prices soared, blind bids became the norm, and houses sold way above asking price – which was a huge turn around in contrast to pre-pandemic market conditions in which only a quarter of homes sold above asking price.
Needless to say, the temperature has been turned up since early 2020 and kept most of America in a hot seller’s market – with North Texas dominating the national headlines.
Navigating Market Expectations Vs Reality
Many buyers seem to believe that the process of buying a house, whatever the nature of the market, is going to be smooth sailing and to their advantage.
“A lot of people, when they think of buying a house, they think of what they see on TV: that we’re going to pick out a bunch, whichever one we like the best, that’s the one that we’re going to jump on and hopefully win,” says Jared Tye in a NBCDFW article.
In reality, however, the fast-moving housing market in North Texas, where houses sold in a matter of days and even hours after hitting the market, rendered the process long and tedious – at least in most cases.
Nearly 75,000 People Moved To North Texas In 2020
A rapid-moving market along with a small pool of homes to choose from, exorbitant prices and intense bidding wars were enough to trigger a sense of stress and fear amongst numerous homebuyers, many of whom were young and growing families who needed more space.
In a regular market, these families would be able to find and afford an upgraded home.
“In more normal times, first-time home buyers move into starter homes. As their families grow, they upgrade to bigger houses. Eventually, empty-nesters and retirees sell their larger homes to downsize or relocate.” – Wall Street Journal
This hot market caused many first-time home buyers to struggle or hold off on their plans to move due to the stakes being raised past their threshold.
7 Sure Fire Ways To Prepare Yourself When Buying In A Hot Housing Market
As the North Texas region is projected to be in the top 10 property markets in 2022, here are seven key strategies to consider when buying to set yourself up for the house you want – without getting caught making an emotional decision that can come back to haunt you.
1. Have Your Financing Lined Up
When buying a home in a fast-moving market, you must have a bank pre-approval letter or proof of funds to demonstrate to the seller that you can in fact deliver the asking price. Listing agents and sellers require this as part of the offer, so it is important to have it ready before you start looking at homes.
2. Sweeten The Deal
Sellers do not just look at price.
There are several additional terms in the contract that can be adjusted to give yourself the best chance at winning an offer:
- Increase the option amount and shorten the option days. The option period is a period of time agreed upon by both parties, where the buyer can terminate the contract for any reason and only lose the nominal amount of option money they have offered. By increasing the option amount and shortening the standard option days, the buyer can provide the seller with more confidence that they will not walk away from the deal.
- Increase the earnest money or deposit that is held in escrow at the title company. Earnest money is typically 1% of the sales price. If you choose to walk away from the deal after the option period is over, you risk losing your earnest money. By increasing your earnest money, you are again signaling to the seller that you are confident that you will make it to the closing table.
- Offer the seller a free leaseback if needed. Many times sellers need a few extra days or weeks to pack up and move out. Provide this time to them for free. This can be the winning factor if the seller receives several offers at around the same price.
Ultimately, by sweetening the deal, you are showing the seller you are serious about making it to the closing table. In turn, you are increasing your chances to get the house of your dreams.
3. Expect To Compromise
As houses on the market become increasingly scarce, Identify your non-negotiables, but also expect to compromise on certain features. There is no perfect home and there may be some things you can live without. However, property experts agree that you should never compromise your goals, budget, location and safety.
4. Prepare For Multiple Bidders
In a hot seller’s market, sellers are fielding multiple offers like a top athlete during free agency. In fact, in July of 2021, sellers were receiving an average of 4.8 offers, which reduced buyers’ chances to get the house. Buyers are advised to start looking at houses below their budget, which will allow them to participate in the bidding war without going over-budget, while leaving a cushion to negotiate.
5. Make A Cash Offer
If you have the financial means, you may consider making an all-cash offer. These offers are often enticing to sellers because they eliminate the risk that the buyer falls through for financial reasons. Cash offers also usually entail a quicker closing time which is beneficial for the seller as well.
6. Be Patient, And Be Practical
Give yourself time. As the current number of buyers greatly outweighs the housing inventory on the market, it may take a little longer than usual to find your dream home. Be patient. It will come!
7. Have A Good Agent In Your Corner
This goes without saying, but having a strong, unbiased team in your corner will make all the difference in the world. Real estate agents keep a strong pulse on the market. They know the do’s and don’ts in all markets and understand what it will take to win a house. They also know the contract inside and out and will protect you and your money throughout the entire process.
Having a good agent who understands your lifestyle and financial goals will go a long way in making the process enjoyable and as stress-free as possible. Contact us today to get started in the search of your future home!