Buying a home is the investment of a lifetime, and that’s truer now than it’s ever been. We’ve heard about homes sold a few years ago that have increased in value by hundreds of thousands of dollars, and one empty lot in the Boise, Idaho, area that increased $50,000 in appraised value before construction had even started.
Homeownership's a great job if you can get it, and you can get it if you try ... try really hard, that is.
With home loan interest rates near record lows and fewer homes being built overall, the housing supply is near record lows. That means high prices, multiple bids on every sale, and many homes being sold within 24-36 hours of hitting the market.
According to the latest research from the National Association of Realtors®, the median sale price of homes is up more than 15.8% from a year ago. What’s more, homes are staying on the market for an average of just 20 days (down from 36 days a year ago). As of February, there had been 108 straight months of price increases.
Conditions have been ideal for sellers for quite awhile now, and the seller's market could continue for months or even years. There are a lot of unknowns, but our premier expert and in-house training maven Cheryl Knowlton put it best:
“All we know is where we’re at today.”
So what can a home buyer do to compete? Every family is different, and so is every market, but we put together top tips from our expert panel to help you out.
Adjust your expectations upfront
Buyers are likely to face competition with every home they bid on, and they’re not very likely to get the first home they try for, said Nick Schlekeway, a real estate coach and CEO of Amherst Madison, the third-largest firm in Idaho. He recommends that buyers put their best foot forward with their first offer. If it doesn’t work out, he said, brush yourself off and try again.
“It’s almost like teaching your 8-year-old about playing baseball or T-ball,” he said. “Life is not always going to work out, but at least you gave your best effort.”
Work with a great lender
Not to toot our own horn TOO loudly, but all of the experts we spoke with mentioned the importance of working with a trusted lender BEFORE you start making offers.
Cheryl, who has 20 years of experience in the mortgage and real estate industry, said buyers need to be ready to go the minute they find a house they love.
“They have to be ready to pull the trigger and prove they have everything in order to even begin to be competitive,” she explained.
Nick went even further, saying that having a top-notch lender is one of the best ways for buyers to compete.
“If there’s three buyers that are all financed and one of them has a responsive lender and the other two don’t, the one with the responsive lender’s going to get the contract,” he explained. “It can literally make the difference between getting the deal and not getting the deal.”
If you’re a financed buyer going up against a cash offer, having that great lender is even more important, said Nick.
“Your task is to convince the listing agent that they’re going to get their money just like they’re going to get their money if it's cash," he explained. "You can’t do that if you have crappy approval letters or a non-responsive lender or incomplete information.”
Don’t gamify the process
Another top agent we spoke with, Dinko Keserovic with EXP Realty, has been in the industry since 2016. He helps buyers and sellers in both Texas and Utah and says the market has just been wild nationwide.
Buyers need to put their highest and best offers forward from the beginning, he emphasized. That’s because games and negotiations just don’t work in a market like this.
“Some people think the seller’s bluffing when they say they have multiple offers,” he said. “There’s no bluff; it’s 100% multiple offers. Believe it.”
He added that a big part of winning in this market is having an experienced real estate agent who knows the market, knows the ins and outs of contracts, and has an excellent track record of following up with listing agents.
Nick mirrored that point, citing rapport between buying and listing agents as one of the top ways for buyers to compete.
Buyers should make sure their agents are finding out what sellers want, Nick explained. Sometimes, for example, a seller might need to stay in their house for a few months after the deal is done. If you can agree to that, it can put your offer at the top of the pile.
Trust your agent (and make sure yours is trustworthy)
For Mackenzie Johnson, a Realtor with Boise Premier in Idaho, it’s essential to work with an agent you trust and who knows the market really, really well.
“Right now when everything’s moving so fast, you want to know that your agent is going to be responsive and can move quickly for you,” she said. “There’s never been a more important time for us, for Realtors, to do our jobs.”
Nick added that having a great agent makes the whole thing a little less personal (and that’s a good thing). Agents bring professional distance to the transaction and make it more uniform, he explained. Using top pros makes things more fair for everyone, and it makes it a lot easier on would-be buyers when they don’t win a bidding war.
Having an agent committed to super speedy communication is also key, Nick said. That’s because a good listing agent is looking for two things: the offer with the best terms, and the offer that’s most likely to close escrow.
“There’s no quicker way to ruin that than poor communication,” he said.
If you’re looking for an agent you can trust with the strategy AND the details, check out our hot tips from Cheryl.
Be willing to give a little (and don't expect concessions)
As a buyer in today’s market, you’re not going to have control of the timing, Dinko emphasized. He recommended keeping your deadlines short or waiving them altogether (your agent will know what that means).
You may also need to compromise on your wish list, he said. That could mean giving up on having a certain number of bedrooms or having a garage, and you probably won’t get seller concessions like help on closing costs.
“It’s very seldom that anybody gets exactly what they wanted even if it’s not a seller’s market,” Dinko said. “If you’re not willing to forego anything, you’re not going to be the top offer.”
It's good to be flexible, especially in this market. But there are some things you probably shouldn’t give up. None of our experts recommended waiving the inspection, for example, and we agree: houses are a huge investment, and you shouldn't buy one without having an expert take a good, hard look inside and out.
Don’t lose hope!
Mackenzie was emphatic about one thing during our conversation, and her sentiment was echoed by everyone on the panel. While it is a tough market out there, it is possible for qualified buyers to get into homes.
Turns out, the numbers agree! Even in these market conditions, the NAR reports that about a third of buyers are first time homeowners.
To succeed, make sure you:
- Know the market going in
- Have reasonable expectations
- Work with a great home finance and real estate team.
With enough patience and commitment, you’ll be enjoying the benefits of homeownership in no time.