You’ve been searching for day, maybe weeks or months, and you’ve finally found it – the perfect house to call ‘home’ for your family. Now what?
You are going to write a purchase offer for the property, but with so many other buyers out in the St. Louis market and so few sellers, you may be going up against other prospective home buyers who want the very same home. Given the difficulty of getting an offer accepted in this market, you can do a few things to make sure that you position yourself to have the best chance to get your offer accepted.
1. How much can you afford?
Tip #1 is an important step to take prior to going home shopping. In fact, other than hiring a qualified Realtor to help guide you through the process, this is the first step you need to take in your housing search. It’s important to know:
A) How much can you actually afford to spend on a monthly basis. Your mortgage payment is going to include both taxes and insurance, neither of which are factored into how you’ll pay given a certain loan amount – your loan officer or Realtor can help you get a better idea of this; &
B) How much a bank will actually lend to you. What you can afford and what a bank will be willing to lend to you are often very different. Without knowing this before searching for a home could break your heart when you find ‘the one’ only to learn that your bank won’t loan you as much money as you thought.
Most Sellers won’t accept an offer that isn’t accompanied with a pre-approval and for good reason. Sellers don’t want to accept an offer and take their home off the market only to find out that the Buyers whose offer they accepted can’t get a loan to buy their house. This means valuable time on the market is lost since other prospective Buyers aren’t going to be touring the home and could potentially result in a lower final sales price. In a competitive market, like the one we’re currently in, there’s almost 0% probability that a seller will accept your offer without a pre-approval. I certainly wouldn’t let any of my clients do so.
2. Act Fast
The St. Louis market is hot right now. In fact, this is one of the hottest markets we’ve seen in over a decade. There are so few homes on the market and that competition is fierce and the buyer who acts the quickest and has the smartest offer will prevail in getting an offer accepted. The best case scenario is that you make your offer strong and you make it before anyone else.
Be on the prowl for homes and make sure you have a good agent who knows what type of house you want and how much you can afford/are willing to spend. There have been several instances where I have been working with clients, sometimes for months, without being able to find the perfect home. Then one day, I see their dream home get listed for sale.
They then get a phone call from me stating that we need to see the house today, now if possible. Each time we’ve gone to see a single home the day it is listed, the home gets a contract on it that day.
You can stay up to date on the new listing by checking sites like Realtor.com or Zillow, or even better you can have your agent set you up on a home search that notifies you immediately by email whenever a new home is listed for sale. The third-party sites gather their data from the MLS, the collective data about homes for sale that Realtors collect when they list a home. This data isn’t fed to those sites instantaneously and you could miss one of these quick-sale homes before the listing is even fed to them.
3. Make a Solid Offer
The time for “low-balling” was back during the Great Recession. Refer to step #1 and then evaluate how much your prospective new home is worth. Refer to the comparable homes that have sold near the home and determine what offer you and your Realtor feel is fair.
One statistic I like to look at to guide me in just how strong an offer a client should make is the days on market. If a home has sat on the market for several months, I can feel comfortable that there aren’t a lot of other people that I’ll be competing against. If the home is new on market and is less than a week old, you should consider just how strong an offer you should make. Sometimes it makes sense to submit an offer higher than list price, since odds are good that other homebuyers are going to try to do the very same thing. Make sure you are comfortable with how much you offer. As Dave Ramsey likes to say, your home should be a blessing, not a curse! Spend too much on it and you’ll regret having purchased it.
4. Be Prepared to Negotiate, and if Possible, Walk Away
If you offered anything less than list price, be prepared for the Seller to negotiate your offer. This will come in the form of a counteroffer, which could change the price you offer, the closing date, time frames like inspections or financing, among other things. You can look to your Realtor to get some guidance on how to respond to a counteroffer, however you need to know what you’re comfortable spending and not overextend yourself.
Decide on a highest possible offer price. Be prepared to walk away if you can’t get a house for that amount or lower. I know that it’s a painful experience, but you give yourself negotiating leverage by giving yourself the flexibility to walk away.
Bottom Line
Know how much you can afford and what you’re willing to spend. Set this limitation for yourself and don’t violate it. You’ll be better off and end up with a mortgage payment you’re comfortable with.