Nobody needs a reminder that the world has changed over the past couple of years. While there are plenty of witty quotes on change versus staying the same, one market full of tremendous change is the real estate market. The recent pandemic sent mortgage rates to the lowest levels ever recorded. Then only to see a pretty sharp rebound to rates at or above what they were prior to the pandemic. This alone would be a pretty large change to the market, but there are still other forces at play.
The interesting thing about a pandemic is that people aren’t able to be as mobile as they have been accustomed to over the past few years. Traditionally speaking, the housing market has been relatively stable and able to deliver on a predictable amount of newly built homes each year. The pandemic threw a wrench into this stability by driving more people than ever to purchase a home.
Rather suddenly, home inventories began looking quite weak. In some places, bidding wars erupted over homes listed hours (or less) ago. While bidding wars do happen, they tended to happen in areas where restrictions and space often created housing issues. Not many people in small towns across America were prepared for bidding wars in their own backyards.
Mortgage Brokers Help Make Highly Competitive Offers with Pre-approval
With homes being sometimes purchased, sight unseen, with all cash offers, obtaining a mortgage can put you at a disadvantage, particularly if you don’t have everything together. Working with a mortgage broker can help with this part of the process, though. With a mortgage broker, you can work to obtain preapproval on your mortgage. This means that your lender has determined that you qualify for a specific loan amount.
This removes some of the uncertainty associated with a buyer who only has obtained prequalification or has not yet secured financing even though they will need a mortgage. Sellers prefer to remove as much uncertainty as possible from an offer, and it can be difficult to compare even a lower all-cash offer to an offer where the ability of the buyer to obtain financing is unknown. Since a preapproval confirms a loan amount, it offers a reassurance to the sellers that you will be able to purchase the home. This can give you an advantage over other buyers.
Remove Contingencies Where Possible
At the end of the day, contingencies are things that need to occur in order for the contract to execute. Historically, you could create contingencies for situations where you may need to sell an existing home or wait for an inspection to complete. The competitive real estate market has made such items luxury items. In fact, many sellers will simply opt for fewer contingencies even over and above the purchase price. Few contingencies generally mean less of a chance that they’ll be back at the same spot in a couple months when the deal falls through.
The best advice is to reduce your contingencies as much as possible. In this market, sellers both want to move quickly and often have the option to do so. This particularly occurs in multiple-bid situations where the slightest detail may be enough to push an offer over the edge.
Real Estate and Mortgage Professionals Know the Details
Working with the right real estate agent and mortgage broker can help get you home. Making a researched, competitive offer will give you the best chance to make it into the home of your dreams. The tips above are a great starting point in this market. Other details like escalation clauses can make your offer even more competitive if it’s truly just the right home, but this is something that you will want to discuss with your real estate agent.
At the end of the day, the offer must be a reasonable one. If your offer is countered, think long and hard about it if it’s the home that you truly want. Placing your best foot forward is an important stance with the current real estate market.
Last but not least, offering more earnest money may help an offer find acceptance. However, each situation is unique and working with a professional helps you think with a clear head in a pressure situation. Here at REALTeam, we can answer your mortgage questions and help you prepare to make the best offer that you can. Get in touch with us today and take the next step in your homebuying process!