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How To Buy A House In 2022's Crazy Market: 7 Steps For Buying Success
Dated: April 6 2022
By O’Brien Realty
2022 has brought us one hot seller’s market! But how do buyers avoid getting burned? Despite the low home inventory and abundance of buyers in the market there are still plenty of ways to buy your dream home. Here’s a list of 7 different steps you can take to give you an edge over the competition and lock down a good deal!
1.) Search High & Low (But Especially The Low)
The reality is that the perfect homes that are move-in with modern appliances are the ones with the most competition, and the first to go. If you are experiencing price tag shock or are getting outbid, it might be time to search at a slightly lower price point. Sure, that might mean that your home might be a bit of a fixer-upper, or in an up-and-coming neighborhood, but it also means that you will get a better deal. Plus you can reinvest the money you saved for renovations! Keep in mind that in a competitive market like this one, listing prices are sometimes set low to build interest and start a bidding war. So searching a little lower might help you find a home you truly afford. For example: if you are looking for a home in the $350,000 range, it might actually sell for $375,000 or higher! So it's best to check in the $310,00-325,000 range for a home that’s actually in your price range.
Ready to start your search? Our listing search is the perfect place to start! It has plenty of filters to narrow down homes for sale, including a price range filter so you can search homes in different price ranges and find the one that works best for you!
2.) It's Important To Be Earnest (With Earnest Money)
Cash offers are king in this market, but they aren’t realistic for most home shoppers. That’s where earnest money comes in! Earnest money is the typical 1%-3% put down after an offer is accepted. Increasing your earnest money down and guaranteeing a portion will make you look more committed and give you an edge over the competition. But be aware, there is some risk associated with this move. Sellers keep the money if the deal falls through for any time or reason, so it is best to save this move for when you are certain you’ve found “The One”.
3.) Get A Letter of Approval
Sure you already have a pre-approval letter for a mortgage, but the problem is so do most buyers. To beat the competition, it’s a good idea to get an approval or commitment letter. These state the type of loan, amount, the terms and interest rate, and can be prepared by the lender once your loan application is approved. Essentially, it demonstrates to the seller that the lender has gone beyond just pulling your credit, and that the seller won’t have to worry about the application going into underwriting or unraveling. Giving the seller less to worry about will always make you (and your offer) look better!
4.) Take The Escalator (Clause) Up & Above Other Offers
An escalation clause (or escalator) is a contract addendum committing you to the price you are bidding and agreeing to increase the amount should the seller receive a higher offer. It will include the original offer, the amount to be raised above competitive bids, and the maximum amount the buyer can offer. So for example, if the asking price is $200,000 and you can afford $10,000 more, you can raise the offer to $210,000 if a higher bid comes in. This gives you a big advantage in bidding wars, showing that you can and will go above other offers. It also protects you from losing out on a home by a thin margin, knowing you “could’ve, would’ve or should've '' paid more.
5.) Offer A Rent-Back Offer
In this market sellers definitely hold the power, but after they accept an offer, they will be scrambling just like everyone else to find a place to go! That’s where you can come in and give them the time they need by offering a rent-back offer. Sweeten your offer by letting the seller stay in place for a period of time (maybe 60-90 days) for free or an affordable price. This will really appeal to stressed out sellers, and rank your offer over the competition.
6.) Wager When To Waive
A home inspection is a buyer’s friend, but waving it could potentially make you the seller’s new friend. In this hot market, some buyers are skipping their home inspection. Now this could potentially give you an advantage over other sellers, but it also could be a major risk. That’s why you need to be really selective about when you decide to waive. A house built in the last 20 years would probably be ok since it falls under the typical lifespan for a roof and mechanical systems. But we advise caution for homes with too many variables, like one with its own septic system- there’s just too many things to consider. Having an agent with experience with building, flipping, and renovating homes is a great asset for deciding whether or not to waive. Which leads us to…
7.) Find The Right Agent
It never hurts to have someone in your corner, especially if that someone has knowledge of the market and how to navigate it! But with this tough market, you need a tougher agent! You need an experienced agent familiar with multiple offer situations, contingency waivers, escalation clauses and more. You also need someone who is attentive as things move quickly! Not sure where to start looking? We’ve got the best in Southern Maryland- click here to find the agent that’s right for you.
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