If you’re shopping for a home, there is a good chance you’re experiencing some of the pain many buyers are going through this summer season in actually finding a property. The real estate market already had more buyers than sellers, but the added challenges of the COVID-19 pandemic has made the situation even more challenging.
In June of 2020, about 54 percent of homebuyer offers faced bidding wars through U.S. transactions made on real estate data provider and broker Redfin. These wars are fueled by historically low mortgage rates and pent-up demand from both first-time and move-up buyers. In some regions and price tiers, the battles are spitting out discouraged buyers who feel like they’re losing.
Here’s some helpful tips to help you succeed during these challenging buying times:
- Be patient, and don’t stop looking. This is easier said than done, but the results will astonish you. You will gain a healthy perspective and attitude. Take a step back, breathe, and let some pressure off your shoulders. You probably came into the home-shopping scene a bit more chipper and happier than today, and now the current reality is settling in. Let it sink in, but don’t let it prove counterproductive in your efforts. If you’re a renter coming up to an annual-lease deadline, consider offering your landlord a month-to-month or quarter-to-quarter negotiation that he or she can’t refuse — it may be expensive but worth it. In the end, the current period, as tough as it may be, is temporary.
- In the grand scheme of things, don’t settle for less than the home you really want — but stay on the alert for “negotiables.” These aren’t buyer/seller negotiables; rather, it’s YOU negotiating with yourself about what is a must versus what’s debatable. If a home you desire in this tight market exhibits 7 out of 10 “musts” and you’re finding it hard to make an offer, you may need to negotiate with your inner self. Do you need those double-pane windows and the landscaped backyard, or could you live with them for a while? Is a third-car garage absolutely necessary? What about the one-story floorplan you’ve dreamt about versus the two-story option standing in front of you that still has nearly everything you need and want? The list can go on and on, so it’s important to negotiate early on in your search.
- Consider geographical trade-offs that are truly worthy of consideration. You might be out of luck on purchasing a home due to your preconceived geographic limitations. Commute time to work, schools, retail shopping, entertainment and the like (barring the current temporary COVID-19 pandemic restrictions) all play a powerful psychological role in choosing a neighborhood. So consider your constraints: Are they boundaries you want to abide by, or is moving outside this territory something you could get used to? For some owners, sometimes looking back on a satisfying home purchase was all due to changing one’s mindset on “where” they could happily live. Contemplate and scrutinize different geographical options where the commute or neighborhood trade-off may actually be worth the home purchase.
- If you’re a current homeowner, consider going “non-contingent” for 3 – 6 months to look more attractive to any seller. This strategy is not for the faint of heart, as it would mean selling your current home and renting for 3 – 6 months on a month-to-month lease just so you can easily home shop and tell sellers you are move-in ready (no need to sell a home to move). It could be expensive, but for some individuals and households, the adventure might be worth it.
- Put every single “feeler” out there, asking your friends, family, and others to inform you if they know of a desirable home coming onto the market. This is in addition to trusting your real estate agent’s local foreknowledge and connections, as well as the Multiple Listings Service (MLS). Nonetheless, getting a jump on a property before it is listed can put you first in line to knowing if you’re truly interested in a property before going to see it. That’s half of the decision-making process right there, and it pays to fast-track it.
- Take a break from home-searching until autumn, and maybe even winter if need be. Yes, there is less inventory on the market during these seasons; but there are also less buyers. It’s a give-and-take situation but sometimes it is beneficial to wait out the buyer crowd and prepare to go shopping a few months down the road when the weather is a bit cooler.
- Use the extra time and month-to-month budget capacity to save even more money for a higher down payment on your future home. You may just find that when you’re ready to enter escrow on a property, this extra down payment could come in handy. When a buyer finally finds the right house and his or her offer is accepted, sometimes the price of the home is more than planned for. Saving more money can be accomplished by cutting monthly household expenses, making more income in a side job, or doing both. Although not saving money per-se, sometimes the extra time gives family members like mom and dad, or whoever, the period they need to throw some monies toward your down-payment efforts — essentially a gift.
- Keep educating yourself on the entire real estate process and local market trends. News reports, monthly data, and all sorts of real estate market information is at your fingertips when it comes to the local, regional and national levels if you search for it. Better yet, subscribe and let it come straight to YOU. The education will help put you on par with your real estate agent’s knowledge and skills, seeing things how he or she sees them and synergizing your know-how and capability. A good example of this is Realtor.com’s “COVID-19 Housing Market Weekly Update,” a 2-and-a-half minute video on recent trends in the U.S. economy, employment, consumer credit, mortgage applications, interest rates, housing inventory, home sales, and more.
- Improve your credit score and debt-to-income (DTI) ratio as much as possible. You are probably already pre-qualified or pre-approved for a mortgage — two different things. However, working on your personal financial numbers up to the very last minute never hurts, whether you’re a first-time buyer or existing owner. Your FICO score (credit score) is calculated by the three main credit agencies using your payment history (35 percent), debt amounts owed (30 percent), credit history length (15 percent), new credit accounts (10 percent), and mixture of credit (10 percent). You can improve it by not arbitrarily opening or closing credit accounts, as well as remaining consistent on monthly payment minimums (or paying more than the minimum if you can). Your DTI is your total monthly debt payments on all loans/credit divided by gross monthly income, before taxes. Usually your total monthly debt should be no more than 43 percent of your monthly income before taxes. You can improve your DTI in the short run by paying down debt, or by increasing your income over the long term, or both.
No matter how long it takes for your offer on a home to be accepted or to find the right neighborhood, don’t give up. There is no perfect solution, but the coping mechanisms and strategies above can help you get further ahead than not.