It is no secret that even as the housing market is doing much better these days, it is tough out there for the typical home buyer, and even tougher for first-time home buyers. Because interest rates are still low and inventory is still tight, these home buyers are continually losing out to all-cash buyers and investors.
"We are seeing our inventory rise, but not enough to accommodate the demand for homes. Mortgage interest rates are edging upward, and many home buyers feel they are being squeezed out at a time when they still see a window of opportunity," says Carolyn Miller, president of the Silicon Valley Association of REALTORS®.
Miller, who has practiced real estate for more than 30 years, has seen it all when it comes to challenges in the market and types of buyers and sellers. She says first-time buyers face more financial challenges and are less familiar with the complexity of a transaction compared to repeat buyers.
"These home buyers get so frustrated that they either drop out of the market, or make a wrong decision. As REALTORS® it is our job to manage their expectations, help them understand the complexities and financial aspects of a home purchase, and prepare them to move quickly in a market where there is a severe shortage of inventory," says Miller.
Miller shares the following strategies that can help home buyers compete in this market:
1. Get pre-approved. Get a pre-approval letter from a mortgage lender. It is not enough to get prequalified. Getting pre-approved is more in-depth than getting pre-qualified. This process includes an analysis of your credit report and extensive financial background check. Your lender will be able to tell you the specific mortgage amount for which you are approved, the interest rate you will be charged on such a loan. You even might be able to lock-in a specific rate. Buyers who are pre-approved have an edge with a seller over those who are not pre-approved because they will have a commitment in writing from their lender. This lets the seller know they are serious and can afford to purchase the home.
2. Check the disclosure documents. When you find a property you like, review and understand the disclosures prepared and provided by the listing agent. If you don't understand something, ask questions and get your agent to get the answers. Some REALTORS® have inspections at the beginning of obtaining the listing and use those reports as working documents to prepare the house. There will be differences between what the house is "now" and what it was "then."
3. With your REALTOR®, prepare a clean offer. Don't worry about the little things; be concerned about the big ones that would impact your living at that particular property. Be genuine and honest when you make the offer. Remember that obtaining a loan is normal. After all, it's all cash to the seller at close of escrow, and cash offers don't always close quickly.
4. Write a letter. Write a letter to the sellers telling them why you like the home, why you can see yourselves living there, etc. Owners love their home and want you to feel the same way. Express your heartfelt feelings. Cash buyers may not always want the home for their residence and that can make a difference to a seller.
5. Have your agent personally present your offer. If at all possible, have your agent present your offer personally to the listing agent and seller. Real estate is a very personal business and an agent personally presenting a client's offer can make all the difference.
"Remember that it's not always all about cash. If you have all your ducks in a row, your offer will be fine," says Miller.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.