By Sadie Fowler
The real estate market can be difficult to navigate for both buyers and sellers, especially for anyone buying or selling for the first time.
First-time buyers can easily become overwhelmed as they search for homes, while sellers hoping to get the best price for their homes might be frustrated if offers are slow to come in or fall short of their asking prices.
If met with an underwhelming market, many sellers can pull their homes off the market and wait until it becomes more advantageous to sell. But buyers, particularly those shopping in a seller’s market, may not have that flexibility.
Buying in a seller’s market can be challenging and frustrating, for sure, but buyers can strategize a survival plan and still land the home of their dreams.
Knoxville has several mortgage lenders who can teach clients how to navigate the market, as well as some very knowledgeable agents. Some of the tips local lenders will likely touch on when guiding you through the process include knowing your budget and getting preapproval.
“The first and most important thing is getting pre-approved with your lender and also shopping interest rates,” said Nancy Keith, with Keller-Williams in Knoxville. “I recommend shopping at least three rates.”
Jason Crippen, a loan officer with Mortgage Investors Group, agreed on the importance of preparation.
“Knoxville is an extremely competitive market right now. Many homes are receiving multiple offers; therefore, it is important to be pre-qualified and know your limits before doing your home search,” Crippen said. “By doing this you will save yourself a lot of time and give yourself the ability to make the best offer up front.”
Sellers may be impatient with buyers who have not yet been preapproved for a mortgage, even accepting a lesser offer from buyers who are ready to begin transactions immediately. The preapproval process is relatively quick and simple, so buyers should not hesitate to apply.
From the opposite view point, this is the market to reach for top dollar for the property you’re selling. Keith, who serves many top tier areas, is known for her multi-million-dollar listings. She recommends sellers work carefully with realtors to get the maximize dollar for their listing. Keith uses current market data to effective price listings, offers staging and home improvement ideas to properly prepare listings, and more.
KNOW YOUR FINANCES
Before you visit the lender, examine your finances. The first step toward buying a home has nothing to do with deciding the style of home you want, but rather, knowing what you can afford. Track your spending to learn exactly how much is coming in and going out each month.
Figure out how much debt you have and then go the extra mile by ordering a credit report so you can see how potential lenders may see you and address any errors. Also, study past bank statements to further study your spending habits, looking for areas where you might be able to cut back if need be.
Once you’ve studied your own budget and bank account, advance to the next step, getting preapproved. This is crucial in the competitive sellers’ market in which we live today.
Lenders will often indicate to prospective buyers how much they’re willing to lend them, and that figure is typically considerably more than buyers are willing to borrow.
Still, however, the loan process is one that’s safely backed by standards, according to Lou Browning, a Knoxville broker with Summit South Mortgage.
“There are strict guidelines that came out of what’s called the Dodd-Frank Act (which was signed into United States federal law by President Barack Obama on July 21, 2010) as to proving one’s ability to repay a loan,” Browning said, adding the act also provides appraiser independence. “This means banks, lenders, realtors — anyone making money on a loan — cannot influence an appraisal.”
Browning added, “The future of the market will remain strong as long as loans are underwritten well.”
BIDDING WARS?
In a seller’s market, bidding wars can quickly drive up prices, but buyers should stick to their budgets so they are not house poor after buying. Sticking to a budget can be difficult in a seller’s market, but such patience will likely pay off in the long run.
Another tip: Be ready to compromise. Unless there’s the rare unlimited budget involved, buyers often must compromise when purchasing a home. That’s especially true in a seller’s market with limited inventory.
Buyers who need to buy a home must identify their needs versus their wants and recognize the likelihood that they will have to compromise.
Working with local real estate agents and understanding the local market is also a major advantage for prospective buyers.
A well-maintained property with all of the bells and whistles that today’s buyers demand will attract many offers, and buyers who have found their dream homes must be prepared to make an offer that sellers can’t refuse.
Standing out in a sea of other potential home buyers is not always so easy, but buyers can go the extra mile in hopes their offer is the one sellers ultimately accept. Buyers can establish a strong rapport with the sellers. It’s not uncommon for homeowners to develop emotional attachments to their homes, and buyers should keep that in mind when viewing a home and negotiating their purchase. Sellers won’t want to hear about how ugly a home is or how much money buyers will have to spend to bring the home up to their standards.
While buyers must weigh such variables when making their offers, keep it as cordial as possible and avoid any inflammatory remarks during the negotiation process. Sellers may be more likely to accept a lower offer from a buyer they like than a higher offer from someone they don’t like.
“It’s not uncommon for me to encourage a buyer to write a letter to the seller explaining their passion for the particular house, such as it’s in a school zone their family wants or what have you,” said Knoxville realtor Sharon Bailey. “When you have multiple offers you have to be aggressive, but also, you don’t want to get caught up in the emotion of over-paying. I might recommend we go in just above the list price, for example, but not being so emotional that a client over pays. I have at times actually had to tell clients to hold back.”
Bailey also encouraged buyers to be prepared by knowing what they want and where they want to live and regularly communicating this with their agent. She suggests driving through various neighborhoods and looking for the type of home they want.
“Many agents are now putting out ‘Coming Soon’ signs, so potential buyers will see that a house is being prepared to be listed before it is,” she said.
Prospective home buyers may find themselves in some stiff competition upon finding their dream homes. But a few simple strategies can make their offers stand out and increase their chances of buying their ideal homes.
For someone wanting to be a little creative with the home ownership process, Keith also recommends thinking outside the box. She mentioned the FHA $230K loan.
“Buyers can find a ‘fixer upper’ and set the amount they want to spend,” she said, explaining the details behind the controlled loan. “In the era of ‘Flip This House’ and shows like that this is sort of a fun and creative approach for buyers.”