Bidding wars, lack of houses and desperate buyers: How to navigate buying a home this spring
After looking at more than 50 houses and writing 17 offers, Taryn and Antonio Orellana recently closed on a house in Lakewood, Calif.
Source: Taryn Orellana
When pandemic life began to feel too tight inside the one-bedroom apartment Taryn Orellana shared with her husband, Antonio, she knew they had to move.
In October, the couple decided to buy their first home in Lakewood, Calif. It was harder than they imagined.
“There were periods of desperation, where we would make offers on houses and we weren’t even sure if this one was ‘the one,'” said 37-year-old Orellana, a nurse practitioner.
In all, the couple saw more than 50 homes and wrote 17 offers before one was finally accepted. They beat out almost a dozen other offers and went about $40,000 over the asking price. They also blew past their initial budget by about $70,000, she said. Fortunately, it worked out and the Orellanas are happily settling in.
Their experience is becoming the norm thanks to the limited supply of homes for sale across the country.
There are now about twice as many working real estate agents as there are listed homes.
“I have been in the business for more than 30 years and I have never seen a market that has been this hot,” said Glenn Brunker, president of Ally Home, which provides mortgage services and products.
He often recommends taking a pause and doing a little soul searching.
“Take a look at your income stream, your employers, the location you are considering buying a home and make sure that the stability of your personal situation is one that warrants homeownership,” Brunker said.
If you are ready to buy, here’s advice from experts on how to navigate the market right now.
Figure out your budget
Get pre-approved for a mortgage
A mortgage pre-approval will give you a sense of the amount you are qualified to borrow, what your interest rate will likely be and the amount of your monthly mortgage payment.
However, just because you are approved for a certain amount doesn’t mean you should spend that much money.
“The only person responsible for your budget is you,” said Lexie Holbert, a housing and lifestyle expert for Realtor.com.
Do your homework
SDI Productions | E+ | Getty Images
Start looking at listings online, including doing virtual tours, even if you aren’t quite ready to begin the process yet. It will give you an idea of neighborhoods you like that are within your budget, Holbert suggests.
Setting up alerts from real estate websites will also let you know when new homes hit the market in those areas.
As you see homes you like, you can figure out your monthly payment based on the down payment and cost of the house by using a mortgage calculator, which are offered by lenders.
A good knowledge base will help you make an educated decision in a short period of time, which is crucial when homes aren’t sitting long on the market.
Get a good real estate agent
Part of your due diligence includes finding a real estate agent that is experienced in both buying and selling homes. They should also have a strong knowledge of the local community and relationships with other realtors in the area.
“You want them to be able to negotiate hard and know what makes a competitive offer in that neighborhood,” Holbert said.
Getting a leg up on the competition
To win over a seller, try to form a relationship with them. That can range from writing a heartfelt letter or having your real estate agent paint a positive picture of you as a buyer.
“If you can connect on an emotional level with the seller through the realtor or as an individual, it does make a difference,” Brunker said.
Prospective buyers visit an open house for sale in Alexandria, Virginia.
Jonathan Ernst | Reuters
First-time homebuyers may have an advantage if they are not depending on the sale of a previous home to buy the new one and have flexibility on when they can move in. One option is to rent the home back to the seller while they look for their new home.
While some buyers are waiving inspections, Brunker doesn’t recommend that tactic since an unexpected repair can put you in a financial bind.
If you have the ability to handle a larger down payment, you could waive the appraisal contingency, which allows buyers to back out if the home is appraised for less than the purchase price. Your mortgage amount will decrease and you’ll have to make up the difference.
“Removing contingencies is not something that everyone should do,” Holbert advised.
“Talk to your agent about the specific situation and really make sure you understand the risk.”