Tips for Buying a Home in a Hot Housing Market
You’re looking to purchase a house, but the competition from other buyers is fierce. Sellers are accepting offers quicker than you can write one. And every house you’ve looked at is selling well above the list price. What’s happening? You’ve just described all the signs of a hot housing market. A hot — or seller’s — market occurs when the demand for houses exceeds the supply.
Some buyers may choose to wait it out. However, if you decide to press forward, here are few tips that can give you an advantage in a highly competitive housing market.
Review and Correct Your Credit Report
Take a look at your credit report as soon as possible. It can take up to 45 days to correct errors, and you may not want to wait that long in a competitive housing market. You can access a free copy of your credit report at AnnualCreditReport.com once every 12 months. Even though your mortgage lender can request a rapid rescore after you’ve corrected errors, it doesn’t hurt to get a head start on the update process.
Gather Your Documents
Your lender will need a variety of documents to determine if you are a good candidate for a loan. The earlier you start gathering these documents, the better. Each lender has their own guidelines, but it’s likely you will be asked to provide copies of the following documents, if applicable:
- Tax returns, including associated schedules
- W-2s, 1099s, and other income documents
- A current profit and loss statement, if you have a business
- Bank, retirement, and investment account statements
- Rent payments, if you don’t own the home you occupy
- Divorce, bankruptcy, foreclosure, and other legal documents
In many cases, you’ll need copies of these documents for the last two months or, in the case of tax returns, the last two years.
In a hot housing market, sellers often prefer buyers who make cash offers or who have the next best thing — a mortgage pre-approval. A pre-approval is typically good for 60 to 90 days and provides a specific, approved loan amount. Don’t mistake a pre-qualification for a pre-approval. A pre-approval has teeth. It’s not a loan guarantee, but your income and assets are documented and the loan is underwritten for eligibility. Your earlier review of your credit report and assembly of important documents can help speed up the pre-approval process.
Find a Real Estate Agent
Having an experienced real estate agent helping you in a competitive market can give you a number of advantages. Their negotiating skills, industry knowledge, and experience with contracts and other forms are resources you can draw on. Plus, agents have connections who may tell them about a house coming on the market before it’s listed. It’s generally suggested that you interview more than one agent. And references from friends and family can help you find one that is committed to your needs.
Make a Strong Offer
In a hot housing market, it’s almost a given that your offer will be competing with a number of others. And the property you want will be selling for the asking price or higher. How can you catch the seller’s attention? Here are two suggestions:
Submit Your Best Offer First
As a general rule, if multiple buyers are interested in a property — it’s not a good time to make a low offer. Even in the best of times, a low offer can offend the homeowner. Plus, in a hot housing market, with many houses selling above list price, a low offer is likely to go to the bottom of the stack. In many cases, your agent will suggest you submit your best offer as soon as possible.
Write a Letter to the Seller
A personal letter to the seller could give you an edge when the seller is deciding between similar offers. If you plan to take this approach, the letter should be sincere and positive, but without too much personal information. You don’t want to make the seller uncomfortable or open the door to discrimination.
Mark Washburn, licensed Realtor at Naples Condo Boutique, shares this bit of advice when it comes to appealing to the seller:
“While it may seem cliche, when all things are equal in terms of competing buyers’ offers and financial strength, a letter or video to the seller can tip the process in the buyer’s favor. A heartfelt appeal that demonstrates that you value the home and will preserve a treasured garden or reading nook can help you stand out.”
It can be a challenge to purchase a home in a hot market. If you’re not ready to sit it out until the market cools — whenever that might be — persistence can help you reach your goal. Even when you’ve made an offer on a property, continue to look at other homes. If your offer is rejected, you can quickly make another offer on a new property.
It may be a hot housing market, but that doesn’t mean you won’t be able to purchase a home.
Buying a home in a seller’s market may be challenging — but not impossible. Getting a mortgage pre-approval and working with an experienced real estate agent can be assets when competing with other buyers. Also, a strong offer that includes a personal letter could gain the attention of the seller. These strategies along with persistence can all help you reach your goal of owning a home.
Tips for Buying a Home in a Hot Housing Market
This blog post was published by Axos Editorial Team on May 12, 2021 and last updated on May 12, 2021.