Purchasing a home is major decision for most people. Not only is it a major financial commitment, it can also be difficult to find the right home. This is especially true in housing markets with low inventory. Simply finding a home that's for sale can be difficult in low inventory real estate markets. For those who are able to find a home that suits their needs, multiple offers above asking price can make purchasing a home a gamble. Here are three tips for purchasing a home in a competitive real estate market.
Homes move fast in markets with low inventory. Because of this, it's imperative that home buyers be able to prove that they are able to afford a home that they are interested in. A prequalification letter is something that a lender gives out that estimates the size of the loan that the buyer may qualify for. These letters make a potential buyer more attractive to sellers. While this is helpful, a preapproval is an even better option.
Preapproval involves submitting proof of income in addition to all relevant financial information to a lender in order for the buyer to get an exact amount of how much loan they qualify for. A prequalification can take as little as one to three days while a preapproval can take anywhere from one week to a few months.
Get an Experienced Real Estate Agent
One of the best tools that anyone can have in a competitive real estate market is an experienced real estate agent. Time is of the essence in these markets and experienced agents will know to stay on top of listings. Home buyers should work carefully with an agent and be upfront about what they are looking for in a home as well as their budget. An experienced real estate agent can also help buyers come up with solid offers that have a good chance of being accepted.
Another tip for home buyers in fast moving markets is to make sure that they are able to move quickly. There is a lot of competition in these markets. In 2016, around 23 percent of home buyers paid cash for their home. While paying cash does increase the chances that a seller will accept an offer, it's not the right choice for every buyer. Home buyers must be prepared to beat out these cash offers and other buyers who are willing to pay over asking. Buyers should aim to see the home within 48 hours and then make an offer as soon as possible.
Finding homes for sale in a market with low inventory can be a challenge. Home buyers should have proof of financing on hand, an experienced real estate agent, and the ability to act fast on homes just entering the market.