Asking Price Is A Starting Point
Have you ever been to an auction? Have you ever purchased anything on ebay? If so, then you might be familiar with something called the reserved bid. For any item that is put up for auction, they have a corresponding reserve bid. Functionally, this is the starting point for the auction and it is the smallest amount of money the seller will accept. If the reserve bid is not met, then the item is not sold and it merely goes back to the owner instead of someone who purchased it. In today’s real estate market, it pays to understand the concept of a reserved bid because it will help you make the perfect offer when buying a home. The asking price for a home on the market is similar to a reserved bid. An asking price is a starting point and that changes how you can make the perfect offer.
Pre-Qualify for a Mortgage
Before you bid on an item at an auction, you need to understand your budget and what the maximum amount of money is that you are willing to spend. Buying a house is no different. Everyone has a walk-away point and you need to know what that price point is before you make an offer on a house you want to buy. One of the most important things you can do to set your budget is to get pre-qualified for a mortgage.
Getting pre-qualified for a home will help you greatly in your quest to buy the perfect home for your family. First, it sets your budget. You know that your lender will only give you so much money, so there is no point in falling in love with a house above that amount. Second, it lets the home seller know you are serious about buying their home. In today’s competitive real estate market, bidding wars are common. It is important to do what you can as a home buyer to set yourself apart from other buyers. When a seller knows that you already have a home loan lined up, it will make you more attractive than those who are not pre-qualified. Every advantage helps.
Choose Wisely
Making the perfect offer for a home is as much about choosing the perfect house to make an offer on. An asking price is like a reserved bid, which means it is usually just a starting point and that you can expect to pay more. Choose which homes you want to make an offer on by selecting homes that have an asking price lower than the amount you have been pre-qualified for. This will provide you some wiggle room and allow you to increase your bid as the sellers receive offers from other home buyers. If you only pick houses that have an asking price right at your budget, then you will be disappointed and frustrated as you get consistently outbid right out of your budget. Save yourself the frustration of losing countless bidding wars and give yourself enough room to be competitive.
Move Quick and Be Nimble
If you see a house that you like and is within your budget it is important to act on it right away. Demand to buy a house is sky high because of low mortgage rates, while inventory is at record lows, which is causing houses to sell very quickly. In today’s market, you do not have a lot of time to sit back and think about a house before you make an offer. Chances are that if you wait, the house you wanted will already be sold and off the market. The days of casual house hunting are over. You need to act quickly, act determined, and get ready to respond to changes.
This is one reason why it is important to work with an experienced independent mortgage broker and realtor. You need a professional who can respond to changing conditions and help you do the necessary legwork before you even make your first offer. You need to know exactly what you are willing to spend and know the specific needs you will not sacrifice when buying a home. From the moment you see a listing to when the sale is complete will only be a couple of weeks. Prepare yourself psychologically for this so that is not shocking and you are ready to meet the moment as necessary.
Make a Fair Offer and Protect Yourself
Most homes are being sold above their asking price. If you see a home you want to purchase, you must assume that there will be other bids and most will be above the asking price. Your offer needs to reflect this reality. In a different market it might make sense to make an offer below the asking price to try and buy a home at a discount. However, that is not the reality that we are living in. Instead of scoring yourself a discount on the home of your dreams, you are much more likely to alienate the home seller. It is best to make a realistic offer based on your budget and the value of the home.
This is another reason why you need a trusted independent mortgage broker and an experienced realtor. Their knowledge of your market and the value of comparable homes can help you make an offer that is within your budget and fair to the home seller. They will also offer expert guidance that can help remove the emotions from the home buying process. It is easy to get caught up in a bidding war. Your desire to win can sometimes lead to big mistakes, such as waiving contingencies like home inspections. While this might get you the house, it can also lead to huge headaches down the road. Home inspections are vital and should not be sacrified. Contingencies help you protect yourself from worst case scenarios. Do not open yourself up to these scenarios when making an offer. There are other houses.
Final Thoughts
It is a competitive real estate market and home buyers are clammoring to purchase the house of their dreams. It is a difficult market for home buyers, however, it is not an impossible market. You can buy the house of your dreams with the right amount of preparation and the right mindset. It is important to understand the challenges you will face as a home buyer, so that you can work with your mortgage broker and realtor to overcome them. Understanding what goes into making the perfect offer on a home is part of the battle. Hopefully, the team at Peoples Choice Mortgage has helped make that process a little easier for you. If you are interested in buying a home and want our help with the rest of the home buying process, contact us! We can try and get you pre-qualified for a mortgage today.
