Spring is Here, Market is Hot, 3 Costly Mistakes Buyers Make
This hot selling season is still predicted to be tight when it comes to inventory. That means that buyers need to bring their ‘A ‘game and keep their head on straight if they’re going to snag their dream home. As an agent, it’s my job to help buyers understand the market we are in.
Here are three common, costly buyer mistakes that often arise when the market is hot, offers are plentiful and prices are rising—and what I can do to help you as my client.
1. Wishing the House Was in a Different Neighborhood
You have seen two-dozen houses and put in a dozen offers. As your agent I understand your frustration. The home that you want—a move-in ready three bedroom in safe neighborhood, good school district, a close commute to work—exists. But that home often doesn’t exist in the most covetable neighborhood in town at the price point you can afford. It doesn't mean it doesn't exist somewhere in a different neighborhood.
As your agent, this can be one of the most frustrating situations for you the buyer and for me.. I want to get you in the best home we can find in your price range and I know we can find that home, it may take time but it will be there. That home may be out of your dream area, but I will always do the best I can to meet all of your needs and as many items of your wish list as possible.
As much as I would like to find that perfect home in your dream neighborhood in your price point, reality may be it doesn't exist in that neighborhood.
Here’s the truth you have to base your expectations with reality that a hot market dictates. If you have searched that dream neighborhood and can't find what you want in your price range It’s time to get real and understand we either need to look in another area or you will have to have the cash or borrowing power to come up with the difference of what you can afford and what you want. It is the only way to compete with other offers or find that home that could meet your needs in another area.
When a buyer has been outbid a double-digit number of times, something about their approach is not working. It may be that you are under bidding based on the market value, it could be that you don't have the cash to out bid people who are offering cash above appraisal price, or it may be that you can't compete with the type of loans other people are using.
Conventional loans, the buyers come in with high down payments which is attractive to sellers because in the sellers mind the buyer has more skin in the game, more likely to get the home appraised because the more down payment you come in with the less you have to borrow and the appraisal won't need to be as high, plus the loan can close in 30 days.
FHA loans are looked at second to conventional loans because they do have a down payment (usually smaller) and they can close in 30 days.
VA loans can be more difficult (no because it is a veteran buying the home) but because there is no down payment, the seller has to pay for more of the costs for closing the transaction, and it often takes 45 days to close.
And of course cash is still king.
It’s time to work through your priorities list and decide what is most important to you. You either need to downgrade your specs in terms of properties you seek—looking for something smaller or in less-pristine condition—or you need to shift your location criteria.
2. Hoping That Perfect House Gets No Other Offers
There’s a fine line between wishing something were true and denying the reality of what actually is true. When buyers face reality, even when it’s painful, it allows them to make an action plan for getting the best possible results with the resources they do have —or a plan for getting more resources.
Ultimately, only you as the buyer can decide how much you can offer on a home. I can advise and provide data to help frame the decision, but you are the be-all, end-all decision maker. Buyers who opt to make a lowball or often times at-asking offer in situations where they are virtually guaranteed to run into high levels of competition are setting themselves up for failure.
As your agent, it’s important to depend on the data in these situations. Poor decisions by buyers most often result thanks to a lack of education about the situation. In these times both you as the buyer and myself as your agent need to exercise patience.
3. Wishing Prices Weren’t Going up so Fast
Here’s the deal: when prices were flat or falling, you as a buyer would (understandably) stressed at the prospect of buying a depreciating asset. Now that they’re ascending, it’s not at all uncommon to see buyers upset and complaining about that as well. But the moment escrow closes, that price will be added to the comps in the area that can either increase the value or decrease the value accordingly.
Rising or prices and a recovering market might be just what is encouraging you to buy, which may make it harder for you to get everything you want. Prices go up based on the economy, the job market improving, and people feeling more optimistic about the future. If many of these other things might not be materializing, that wouldn’t be so great either.
Wishing prices weren’t going up so fast contributes to a costly denial that prices aren’t really what they are. This can cause you to make low-ball offers and waste your precious time on homes you can’t compete for within in your budget range, all while the market is appreciating —and that’s how you can get priced out of the market, right under their nose.
Don’t let your dreams fall prey to this costly wish-based pitfall. Keep in the know on how prices are trending throughout your house hunt, and use that knowledge we see through static's to power your decision-making about what price range to house hunt in and what price to offer for target properties.