When timing is everything
Buying or selling a home is always a delicate balancing act of coordinating the timelines of the buyer, the seller, the lender, the title company, appraisers, home inspectors, and the Realtors involved. With all of these variables and moving parts, keeping everyone on the same page is a must to ensure that settlement happens on time. I liken it to putting together a gigantic puzzle where each piece is rotating and floating, and my job is to make sure that the puzzle gets put together completely with no missing pieces. After all, as a Realtor, I don’t want anyone to end up homeless!
In a “normal” market, whatever that might mean, this is still a challenge. But in this accelerated market that we are currently experiencing, timing is even more important, and can mean the difference between scoring the home of your dreams and getting beat out by another buyer. Determining your timeline is an essential first step when thinking about buying a home in this busy spring market.
Since most homes are selling quickly, often at (or above) asking price and often with multiple offers, the first step in determining your timeline is to define yourself as a buyer. There are two main categories of homebuyer, and two main categories of financing that will determine your competitiveness as a homebuyer. Effectively, in today’s current market, buyers need to also market themselves when making an offer on a house- we want the seller to want to sell their home to YOU, not that other buyer!
So where do you fall in?
First-Time Homebuyer
Being a first-time homebuyer doesn’t necessarily mean you’ve never owned a home before. For the purposes of the real estate market, it just means that you don’t currently own a home.
If you’re a first-time homebuyer, you might actually have an edge in this market, because your offer won’t be contingent on selling a home before you are able to settle. Your timeline might also be more flexible, allowing you to offer the seller either a quick settlement or a delayed settlement, depending on their timeline. Sellers who will need to find a home will appreciate this flexibility.
Current Homeowner
If you currently own your home and are hoping to move, the first question you should consider is whether or not you need to sell your home in order to buy a new one. To determine if this is a possibility for you, the best idea would be to talk to a mortgage lender.
If you can, buying your new home before selling your current one may be the best course of action for you. You would be able to ensure that you find a suitable home before selling your current one, and wouldn’t be forced to make a hasty decision because your home is under contract. Also, any offer you make on a home would be attractive to a seller because it would not be contingent on selling your current home.
If you can’t buy a new home until you sell your current home, it’s very important to carefully plan the whole process with both your Realtor and your mortgage lender. This timeline can be delicate and a bit scary, but as long as everyone is on the same page, you should be fine.
The first thing you should do is list your home for sale. I know it sounds scary and crazy to list your home for sale when you don’t know have a specific house to move into. But even if you find the home of your dreams, a seller in this market is unlikely to accept your offer if you have to sell your home and haven’t listed it yet. Luckily, in this market, we should be able to get your home under contract rather quickly.
For example, I just listed a home last weekend, and we were under contract within seven days. I worked closely with the owners to get the house ready and developed a specific and comprehensive marketing plan, including professional photos, professional cleaning, targeted online ads, an open house, in-office marketing, as well as local marketing. Now my sellers are ready to tour houses and make an offer confident that it will be appealing to sellers.
Why does Financing Matter?
When you write an offer on a house, you’ll be required to indicate how you’ll pay for the home- makes sense, right? It’s perfectly reasonable that a seller would want assurances that you’ll be able to actually afford the home you’re making an offer on. That’s why you’ll also need to submit a preapproval from a reputable lender along with some other information on your personal finances.
But why does the seller care HOW you’re paying for the house? The short answer is that not all financing is created equal, and it can have different implications for the seller.
A seller is going to get most excited about a cash offer (no, not shoeboxes or briefcases full of wadded up dollar bills- cash in a bank) because there will be no question of whether or not the home will appraise for the sale price. When a mortgage is involved, the lender will not want to finance a house for more than it’s worth. So if a house sells for, let’s say, $350,000, and the bank’s appraiser determines that the house is worth, let’s say, $325,000, it can cause a major problem for both the seller and the buyer.
However, most people don’t have access to hundreds of thousands of dollars in their bank accounts, myself included, so you’ll most likely use a mortgage to purchase a home. Without going into a dissertation on the differences between the different loan types, a conventional loan is typically most appealing to sellers. FHA and VA loans can sometimes require that the seller complete some safety related repairs before the lender will fund a loan on the home. And buyers using an FHA or VA loan can ask for up to 6% of the sale price as sellers’ assist with their closing costs. That can take a pretty big chunk out of the proceeds a seller is expecting to receive from the sale of their home.
Working closely with your Realtor and mortgage loan officer will ensure that you’re not only finding the best loan product for you financially but that you’re also finding the loan product and financing terms that will make your offer the most appealing to the seller.
The best advice I can give to buyers in this current market is to trust your Realtor. I constantly check inventory in the neighborhoods and areas my buyers are looking in, and I keep a watchful eye on the comparable properties in the neighborhoods in which they will be selling. While I still haven’t received my crystal ball that would allow me to predict exactly what’s going to happen in the market, I base my advice on market data and current conditions so that we have a pretty good idea of how the selling and buying process will look.
Thinking about throwing your hat into the ring in this busy market? Let me know what type of buyer you are and we’ll develop a road map for the whole process for you. Comment below or email me anytime!