How to buy a home in a hot market
Hawaii has always been a competitive market to buy a home or condo. But now more than ever, a combination of low interest rates, minimal inventory and influx of buyers from the mainland have Hawaii’s housing market at an all-time competitive high. With listings often getting multiple offers within days of hitting the market, many prospective buyers have thrown in the towel on their home search.
But if you are prepared and persistent, there is hope. Here are tips on how to buy in a competitive market.
Define Your Home Purchase Budget
Defining your budget is the single most important step to make when deciding it’s time to buy. This will help narrow down your search criteria and help make the process more efficient. The price of a home in Hawaii depends on a variety of factors:
By defining your budget, you can set a max price for your search and not waste time looking at property you are unsure you qualify for. Don’t forget to account for closing fees, title and escrow fees which will potentially limit your budgeted home price as well.
Getting Pre-Qualified for a Mortgage Loan
Before you choose to pursue the home or condo of your dreams, you will need to obtain a prequalification letter from a lender. The prequalification letter is a pre-approval to obtain a future loan amount. The factors which impact the loan amount are generally debit to income, credit score, among other factors. Before visiting any for-sale homes, it’s crucial to get pre-qualified for a loan with a mortgage lender who regularly lends in Hawaii. There are several reasons why it’s necessary to do so:
- Gain a better understanding of the actual price range that you’ll be able to afford.
- Prequalification letters allow buyers to focus searching for properties they qualify for.
Getting prequalified provides an estimated monthly payment of PITI (Principal, Interest, Taxes, Insurance) for the loan that you qualify for and make sure that it’s going to be comfortable for you.
A lot of people get hung up on price and waiting for the “perfect” deal. In reality, knowing your monthly payment will make a price decision much easier. Once you’ve been prequalified, you can ask any lender to provide the monthly payment breakdown for any home you are considering to purchase.
(sample of a monthly payment breakdown for PITI)
When you are comfortable with a set monthly budget, you can look for homes with a monthly payment that are within range.
Loan Program Availability
In addition, there may be a wide range of other programs and benefits available to consider. A common assumption is that buyers need a down payment of 20% in order to purchase a home. There are all types of great programs available to buyers such as First Time Homebuyer, VA (if you have served in the military), USDA, and FHA. Qualified lenders will explain these programs and let you know what benefits you qualify for.
Browsing Property – Use A Systematic Approach
Process of Elimination
After you define a price range, it’s time to start looking for property. Hand picking the perfect home or condo is really difficult. A more effective way to find your home is to use the process of elimination. Start by defining some key characteristics you would like your home to have such as:
- Bedroom/bathroom count
- Square Footage
- Condo or Single Family Home
Look at all available listings that match this criteria and then try to narrow down to your top 5. If you are overwhelmed by options, start with the Neighborhood criteria and condo or single family home decision.
Look at Homes or Condos In Person
With a narrow list of homes within your budget in hand, now it’s time to arrange an in-person showing. Even if a listing doesn’t look like your complete dream home, it’s important to view properties to help guide your purchasing decisions.
Remember, listing photos don’t always tell the full story on a property. Photos are often highly edited and accentuate only the best parts of the home. By going to see a property firsthand, you will get a full picture of condition, quality and more. You will also be building valuable reference points to look back upon when you do find the right home.
Real Estate Listing Alerts
Don’t see anything you like immediately? Don’t despair. New listings come onto the market everyday. If you have your budget and criteria defined, you can have your real estate agent set alerts or create free real estate market reports for properties that match what you’re looking for. When a new property comes onto the market you’ll be ahead of the pack in viewing the home and submitting an offer.
Competition and being Prepared
There are many people who have given up their home search because they believe there is no chance. This isn’t true. While it’s common for a well priced listing to receive multiple offers within the first week of hitting the market, there is a reason why they move so quickly. It’s because there are prepared buyers that can move fast.
The key to this is being prequalified and working with an experienced agent. The buyers that can make fast decisions do so because they know their budget, have been prequalified and are working with an agent who knows how to make an attractive offer.
Making a competitive offer
Attach a preapproval letter.
Once you’ve been prequalified, looked at a home and are ready to offer – the next step is getting a preapproval letter from your lender. Any potential buyer who is financing should attach a pre-approval letter to an offer when submitting to a seller. A pre-approval letter is one step above a prequalification letter and is a loan preapproval for a specific home rather than a budget amount.
This tells the seller formally that the buyer has done their financial leg-work and is ready to purchase this property specifically. This ensures a stronger offer when compared to any other general prequalification letter.
Work with the best local real estate agent who knows how to make an attractive offer
Anyone can look online for properties these days, it’s true. You should however involve a buyers agent early on in the process for many critical reasons.
An experienced buyers agent should be able to get you up to speed on the status of the market, which properties will move fast, and how to make an attractive offer, which is all critical in a hot real estate market.
When you do find the right condo or home, an experienced agent should be calling the listing agent to find out if there are other offers submitted and finding out what the seller is looking for in an offer. They then should be able to coach you on how to make your best presentable offer to the seller while also protecting your best interests.
Real estate can seem intimidating in a fast moving hot market but with persistence, a system to follow and the right coaching, you can better your chances of purchasing your dream home or condo.
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Original source: https://www.hinowdaily.com/how-to-buy-a-home-in-a-hot-market/