How To Buy Smart In A Competitive Market
Welcome, readers! So, you found this because 1) you're looking to buy a home, 2) you enjoy a little light reading, and 3) you thought this topic sounded somewhat interesting or useful. Don't worry, no trolls here. This isn't clickbait, this is just an article about how to win in a hot real estate market.
If you're not from the Triangle area, then for one, you don't know what the Triangle is. It's the geographic area made up of Raleigh, Durham, and Chapel Hill. Three cities with three personalities all within about 20 miles. Folks who currently own a home or are looking to buy a home right now will tell you this about the Triangle - the market is on fire. About a third of our closed transactions in April were above asking price, and demand is growing as we speak. The reasons? Two main reasons:
1. Raleigh isn't the North. People move down to escape poor traffic, high taxes, and rude Northern city folk. That was me - I'm from Baltimore.
2. Raleigh isn't the South. Florida and Georgia are too hot and humid, and the more South and West you go from here, the less comfortable an environment for typically liberal, suburban Northerners.
Look at this recent run of awards this area has gotten here, among a plethora of awards for our nearby suburbs Apex, Cary, and more.
Wake County, one of the major counties in our area, is gaining about 65 people per day. We're building about 20-ish homes per day....so demand for housing is increasing daily. Rents are rising, home values are rising, and if you're looking for what most other folks are looking for, you'll be in a bidding war - a situation that can be quickly discouraging for those who aren't prepared.
So.......be prepared! Here's how to either win the popular house or find opportunities for a deal.
WIN THE MULTIPLE OFFER BID
It's a tough world in several markets and categories. Sometimes just needing to be in a certain area means you're going to be in competitive situations no matter what you do. Here's what you need to know to beat the other buyers.
***NOTE - don't think that getting in a bidding war means you're getting a "bad deal". Paying the most for a house can be a beautiful thing. One, it'll encourage the neighbors to sell their homes and they'll get even more money....appreciating your investment. Two, the market is hot because it's growing....and you'll be buying a home in one of the hottest growing areas. We've seen individual neighborhoods go up well over 10% in a year! Three, it's your HOME. If location is important to you, it's worth a few bucks to not compromise on your happiness.
1. Be a strong buyer, or at least look like one. This means that you need to give the Seller the utmost confidence that you're going to go through with the transaction. Speak with a lender in advance of your home search....and don't just be pre-qualified, meaning they've checked your credit and you can buy, but be pre-approved....meaning the lender has fully verified all your debts, incomes, credit, and other factors so that you're already fully approved for a loan, subject to nothing. That's the equivalent of walking onto a car lot with financing arranged at your bank. Your offer is as good as cash and you can close (read - give the Seller their money) in half the time of buyers who haven't done this (basically, all of them).
2. Find out what's important to the Seller. Some want fast closing, some want long closings, some want a lot of Earnest Money on the line, some want no repairs....and structure your offer to give them as much of those wishes as you reasonably can. They'll know up front that you're trying hard to work with them and be accommodating.
3. Consider offering "as is". This vaults you to the top of the list. It's risky, so you need to know the house pretty well by having a contractor buddy, a good Realtor, or a good understanding of homes. If you tell the Sellers you're not going to nickle and dime them over a few rotten pieces of exterior trim and a leaky faucet, they'll prefer your offer over another one that may be for more money.
4. Put in your best offer. This isn't a car lot, where we try to pretend we don't want the car and start walking away. It's not eBay, where you can see the other bids that have come in. It's a blind multiple offer, highest and best. You get one shot. At what price are you willing to lose the house? Would you be mad to learn in 6 weeks that the person in YOUR dream house paid $1000 more than you over thirty years ($5/mo on average)? Keep doing that test until you know what you need to offer. CAUTION - there's risk here, including that the home won't appraise if you go too high. Speak with your Realtor about your cash on hand, your financing needs, your budget, and the actual value of the home so that you're best protected and prepared.
5. Write a love letter to the Sellers. About the house, of course.....don't want to weird things up. Tell them a little bit of your story and why this is the home for you. Assure them that their home is going into good hands with you and you can't wait to make new memories in this perfect home for you. Remember to thank them for their consideration.
6. The fewer contingencies, the stronger your offer. Imagine this scenario - Buyer A is offering full price and will buy the house if the inspection is to their liking, if they get approved for financing, and if they get a suitable offer on their home in time to close. Buyer B is offering full price and will buy the home. They're already approved for financing and are buying the home with the understanding that it's going to need some minor fixes and updates. Which offer would you take if you're the Seller? Bump Buyer A up a few thousand bucks....still taking the other offer, right?
FIND A DEAL
It's a seller's market, right? Prices are going up and there's nothing to get a good price on, right? If I want to buy now, I have to overpay for the home and hope it appreciates to catch up, right? Nope. See below - there are plenty of opportunities to get value in this market.
1. $400K+ market - significantly cooler than anything below $400,000. The main reason? A big chunk of the population growth is millenials coming to establish their careers in a rock-solid job market (fueled by the Research Triangle Park) and 50+ folks downsizing from their larger Northern houses after the kids move out. There are places where the crossover point is significantly lower - some of the rural suburb towns of the Triangle become a buyer-friendly market at about $250K. Other areas, such as right around North Hills, sell quickly up to about a million dollars. For more specifics about where you can find a more buyer-friendly market for your budget, it's simple - ask a Realtor! (by the way.....I'm a Realtor :) )
2. New construction - prices are still rising but builders won't allow bidding wars. First person to buy the home gets it, the next person can build another just like it. Many builders have homes that, for one reason or another, aren't selling....and you can even get them to come down on their prices in some cases. Supply is on the way here, as we've currently go over 10,000 new builds in the works over the next 12 months!
3. Rural areas - As I hinted to before, there are places that are hopping and places that are in lower demand. The further out you go from the city centers, the fewer buyers are looking to be there. If you're not married to a certain location, consider branching out your search to include more areas. As a perk, you'll get more house for the money in these places too!
4. Houses not yet on the market - for this one, you need a hard-working agent. Our team is constantly talking to people looking to put their home up for sale in the near future, or folks who are trying to sell on their own. A red sign in the front yard doesn't show up on our website or any other website, so you'll need the assistance of someone who's working the area. Let us know what you're searching for, and it's much easier to get a good price from a Seller who hasn't seen the madness of the market yet.
5. Bank-owned properties. Also known as REO, or Real Estate-Owned, these are almost always a good deal. The banks sell as-is, don't work with a lot of special financing programs like FHA or USDA, but they sell them below value in return for offering no guarantees or information on the property. There are constantly properties being sold on the active market or auctioned online, or even sold on the steps at the county courthouse. If you've got some money to you to offer cash or a 20% down conventional loan, and don't mind doing some work, this is a great way to go.
I hope that you keep this in mind as you search for homes here. There is a home here for you, the trick is finding it and being ready when it arises. Enjoy your home search and let our team know if there's something we can do to help you find your "the one"!
Author: Matthew Szalecki
June 13th 2016
About Matthew: ...