Competing as a first-time buyer in a wild and crazy seller’s market
First off, this adventure isn’t for the faint of heart. Being a first-time buyer in the Seattle area will test your patience, your sanity, and maybe even your will to be a homeowner. That said, there are a few things you can do to better your position.
1 – Get pre-underwritten (not just pre-qualified or even pre-approved) by a local lender who sellers will trust. This means your loan application goes to the underwriter and is approved subject only to a clean appraisal. Most sellers want the assurance that your sale above most anything else. We’ve all heard the horror stories of financing falling through at the eleventh hour. Sellers have heard them too. Getting pre-underwritten is the best guarantee you can offer a seller that you are a sure bet.
2 – Save as much as you can. Putting 20% or more down is the ideal, but in today’s bidding war arena, you might even have to agree to make up the difference for a low appraisal.
3 – Consider shelling out money for a pre-inspection on the right home. As a first-time buyer especially, you need to know about a home’s deficiencies. Sellers aren’t likely to allow an inspection contingency today, so often your only opportunity to inspect is before you write an offer. At an average of $500 an inspection that can add up to a lot of dough. Consider setting personal guidelines for which homes you’ll pre-inspect and which ones you won’t. For example, you might choose to pre-inspect a home that is an 8 or better out of 10 on your criteria scale, is very comfortably in your price range (with room to spare for escalation) and has fewer than 2 other pre-inspections being conducted.
4 – If the home is occupied, consider giving the seller a free rent-back period to make their move out less stressful (and your offer more enticing). Typical rent-back periods are 3-60 days depending on how aggressive you need to be. Yes, it costs money…but it just might make the difference between your offer and a better offer with no rent-back. Sometimes peace-of-mind (and sanity) at move-out are more important to a seller than getting more money.
5 – Assuming you have done all the above, consider waiving typical contingencies and releasing a part or all your earnest money to the seller on mutual acceptance to sweeten the pot. While there is a degree of risk in doing this, if you’ve done your due diligence ahead of time, this can be a compelling approach that doesn’t cost you any more at the closing table.
6 – Of course, it is essential to have a competent real estate broker who can help you navigate these waters, determine the value (as compared to similar properties), history (permits, prior sales, etc.), and activity (other offers, pre-inspections, expressions of interest) of potential properties you are interested in. This helps you go in armed with the information to make sound decisions with a clear offer strategy that will help you win far more effectively than the typical guesswork that goes in too many offers written without this guidance. A reputable broker also makes for a more reputable offer. It goes back to that assurance that the sale will close. Most sellers feel more comfortable accepting an offer when there is a solid realtor, lender and buyer behind it. It’s a package deal and everyone plays a role in making it all happen.
Lastly, be prepared for the adventure. There will be joy, surprise, heartbreak, anger, frustration and bliss along the way (hopefully not all in one day). If you go in knowing it will be a challenge, you’ll be much better prepared for the task at hand.
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© Copyright 2018. Information and statistics derived from Northwest Multiple Listing Service.