How to get a good deal in this crazy housing market
Here are 10 tips and tricks buyers and sellers can use to stay ahead of the competition.
MINNEAPOLIS – Buying a home is an emotional experience.
It can be fun and exciting, but scary and overwhelming at the same time.
Especially for first-time buyers like Sam and Tessa Chase.
âWe didn’t know absolutely nothing. We didn’t even know there were closing costs. So we were like literally starting from scratch,â Sam says.
Sam and Tessa started looking for a house at the end of January.
They looked at almost 30 homes and made offers on three of them, but they never worked out.
âWe had offers up to fifty more requests that weren’t accepted,â Sam says.
âThere was an offer that when we didn’t get it, I almost agreed because we had to go high enough,â Tessa says.
They almost gave up a few times, then on their fourth offer they landed in a nice 4 bedroom, 3 bathroom home in Minneapolis and they are closing it next month.
âWe feel lucky to have a good house in a good neighborhood,â Sam says.
It only took them about a month and a half to find a home they love, and they only had to go over the asking price of $ 15,000 to get it, which in this market is in. made a very good deal.
But not all stories end this way.
In this crazy market, a lot of buyers do crazy things to get into a house.
Realtors shared stories of some buyers who were willing to pay up to $ 75,000 more than asking price.
Some buyers are even willing to forgo their inspection.
Some are even ready to buy a house based on the photos alone.
This can deter many buyers from entering this hot real estate market.
But if you’re smart and create a solid strategy, realtors say it’s always possible to find a “good deal” in this crazy market.
Here are some tips and tricks to help you get there:
Kevin Curtis has been in the real estate business for almost 20 years.
He says the most important piece of advice he can give to a new buyer is to take your time.
âYou have to be patient in this market,â says Curtis.
He says it’s important to understand that you may need to review a few dozen homes, and you may need to bid five or more before you get one.
âBuyers who get a home on their first offer should feel so lucky because it’s so rare,â Curtis says.
And don’t be discouraged when you lose multiple homes.
âBad decisions can come into play in desperation,â Curtis says. “This is when people start to throw really high bids and make decisions based on their emotions.”
In most cases, paying full price will not reduce it.
Curtis says buyers should expect to always bid above the asking price.
âYou probably won’t get a house for less than asking in the Twin Cities,â says Curtis.
âWe see houses with 120 screenings in three days. It’s a lot of competition. “
Tip # 3: You might have waived the inspection
Most real estate agents would discourage buyers from forgoing their inspection, but Curtis says it’s a sad reality in this market.
âI’ll bet you it’s close to 80%,â Curtis said. “Eight out of ten buyers forgo inspection at these more average prices.”
But there are ways around it.
Curtis says you can do an informal inspection when you walk through the house for the first time.
âYou can bring an inspector with you while you look at the house before you make an offer,â says Curtis. âThere are companies you can hire to help you do this.â
Doing it this way is often cheaper, but it’s not as extensive as a real inspection, so the inspector may not catch everything.
Which brings us to tip number fourâ¦.
Tip # 4: get an inspection, but set a limit
Sellers generally don’t like home inspections because it gives the buyer an excuse to back out of the business.
However, Curtis says many buyers write specific clauses in their offer that they will not ask the seller to fix anything if the cost is less than a certain amount.
âSo you could say that we, as the buyer, are prepared to cover up to $ 5,000,â Curtis says.
“This tells the seller that you are not going to nickel them with the small repairs.”
This is a great strategy for older homes that are more likely to have hidden issues, like foundation issues or old plumbing.
Sam and Tessa used this strategy to land at their house and Curtis says it has helped a lot of his other clients as well.
Tip # 5: increase your down payment
This trick is easier said than done.
Some buyers may have enough to cover a 3% or 5% deposit.
Curtis says you might still be able to get a house with that small down payment, but he says the odds are stacked against you.
âTo win in this market you have to really be 5% or even 10%, and if it’s a 20% drop from conventional buyers, as a seller you know the buyer is strong. and that you’re more likely to follow them, âCurtis said.
Tip # 6: Make sure your money is fair
Serious money is the amount of money you put into an offer that shows you are serious about buying a home.
A common amount is around $ 5,000 and traditionally this money will be used to pay for the down payment and closing costs on your home.
Curtis says some buyers decide to guarantee some or all of this money so that a seller can keep it if the buyer pulls out of the transaction.
âYou can earn some or all of that money non-refundable. Sellers like to see this because it’s a decent sum on the table and it means the buyer is less likely to walk away from the deal. “
Tip 7: Negotiate a valuation gap in your offer
Appraisals are an important part of the home buying process.
Your bank or mortgage lender will likely order an appraisal of the home to determine its value.
âAppraisers have a lot of power in this market,â Curtis says. âThey are ultimately there to protect the lender and the buyer. They want to make sure that what the buyer pays, the house is really worth it. “
Here’s how the assessment process might work:
Let’s say the buyer offers $ 400,000 for a house.
An appraiser could also appraise the house at $ 400,000 or maybe even a higher amount.
If this happens, no problem, the mortgage process will continue as normal.
However, an appraiser can appraise the house for a lower amount, say $ 350,000.
This means that the bank or the lender may only be willing to offer the buyer a loan for a maximum amount of $ 350,000.
That $ 50,000 gap can turn into a huge problem.
On the seller’s side, he may just have to sell the house for $ 350,000 or risk losing the buyer.
Curtis says that in most cases the buyer and seller will come to an agreement, but if they can’t, the seller could decide to put the house back on the market.
Obviously, sellers would like to avoid this, so they might be more inclined to accept an offer that has some sort of guarantee on the part of the buyer.
âA buyer can agree to pay that difference, a certain amount, like $ 5,000 or $ 10,000,â Curtis says.
This is another common strategy in the current market, but Curtis says it is also risky, as buyers would need to find so much money before the deal is finalized.
“That’s a lot of money that buyers would need and so you really have to budget for it if you want to put something like that in an offer.”
Tip # 8: Learn as much as you can about the seller
Let’s be honest, money is what salespeople are looking for the most, but Curtis says that’s not all.
If a seller is looking to close their home quickly, or if they are looking for a strong buyer who will not give up on the deal, buyers can use it to their advantage.
âIt can be done with your agent. Have them call the listing agent on the phone and make that connection. You have to find out what’s important to the seller in an offer,â says Curtis.
Tip # 9: For sellers, don’t overstate the price of your home
Even though it’s a crazy market right now, Curtis says buyers are smart and know how to value a home.
If they think a house is too expensive, they will move away from it.
“It’s weird. In Minnesota, people don’t offer less, they just decide to watch it and see if it falls.”
And if the price of a home drops, some buyers and agents may wonder if there is something wrong with the home.
Then all of a sudden the seller doesn’t get as many offers and you might not get the best price for your home.
Tip # 10: For Sellers, It’s Always Important to Clean and Showcase Your Home
That’s right, sellers have all the power in this market, but Curtis says sellers shouldn’t be lazy.
He says they still have to clean and fit out their home because it will attract more buyers and more offers and result in more money in the long run.
He says good photos are also important.
At the end of the day, every situation is different.
An offer that wins you one house may not work on another.
Curtis says it’s important for buyers to find a knowledgeable and willing real estate agent to go the extra mile.
âThere are so many strategies that are used. It’s all about talking to your real estate agent and making an offer that you’re comfortable with that also gives you a good chance of getting home.