Buyers Facing a Changing Market

House hunters looking to cash in on the "perfect storm" of low mortgage rates and reduced home prices may have to change their strategies. Market competition due to diminishing supplies of homes in certain price ranges and locations is causing a condition we haven't seen in awhile - multiple offer situations. For that reason, and what I try to tell my buyer clients, is that if they want to get that "deal", they will need to make a realistic offer and be prepared to move quickly.

How To Prepare

• Research the area and available properties ahead of time. Make sure you know what you are looking for in a home and understand home values.
• Before I take a buyer client out to see homes, I make sure they have already talked to a lender(s). I want to know that they are serious, but more importantly I want to know that if we find a house that they like, they are actually in a position to purchase.
• When shopping for a mortgage, look for a local and accessible lender. Ask questions - How long will the approval process take? Are underwriters on site or in some other location? Can the lender provide a preapproval letter quickly? What are their current rates and fees?
• While it is not required, to save time and show buyer intent I like to include a lender preapproval letter with any offer I present. A preapproval letter will inevitably be requested by the seller so that he has some indication that the buyer can, in fact, get a mortgage. To take it a step further, actually going through the mortgage-approval process will save transaction time and determine the maximum amount you can borrow. A seller will consider that a big plus, should you be in a multiple offer situation.
• Any credit issues should be resolved in advance and make sure you have the cash for closing costs and the down payment.

Making An Offer

Despite the decline in the housing market, buyers should realize that homes are selling and that most likely, if you are interested in a home that looks good and is priced right, someone else is too! So when you find a home that you like, you need to be ready to be decisive and move quickly. You want to write a strong offer. Your agent should try to find out what is motivating the seller; if timing is important to them, or money, or both. Then you can try to tailor your offer to include those things if possible.
An earnest money deposit will also accompany an offer. Minimum is usually 1% of offer price, however, a higher earnest money deposit may make a statement about how serious you are. The type of loan you are going to obtain may also play a part in whether a seller chooses your offer over another's. FHA, USDA and other government loans may have more stringent requirements and appraisals, whereas conventional loans or a cash buyer may be more appealing to the seller. Conventional loans usually require a larger down payment.

In conclusion, buyer competition and multiple offer situations may be something you will face in the future. If you follow some of these tips, are decisive and prepared, it could help you get an accepted offer and the home of your dreams.