Many home buyers are starting to get stressed about the market. We’re straddling the thin line between spring and summer, and houses are moving fast in Grand Rapids.
If you’re looking to buy now, how can you compete in the middle of a hot market? Generally, sellers are looking for a combination of three things:
- The highest price possible
- The highest likelihood of closing
- The smoothest process, with the fewest headaches
Different sellers will have different priorities. Some will only care about the highest possible price. Others will want the quickest and easiest closing, even if they get a little less money in the end.
Knowing this, there are several things you can do to make your offer more attractive. Let’s dig in to some specifics.
1. Get Pre-Approved by a Lender
Once you are serious about making offers, talk to a few mortgage companies. Shop around for services and recommendations, and don’t be afraid to ask for specifics like interest rates and fees. Once you feel comfortable that you’ve found a great provider, ask them if you can get pre-approved for a loan.
They will likely ask you about your income, bank statements, and the price range you’re considering for your house. They will run a preliminary credit check, and let you know if you are pre-approved. They will issue you a letter outlining the key details, including the amount they will consider lending.
Offers from pre-approved buyers are much more attractive to sellers. They can feel more confident that you will get a mortgage – which leads to fewer headaches for them.
2. Choose a Pro to Represent You
If you’re looking at houses on the MLS, you’ll want a great buyer’s agent to represent you. Not all Realtors are created equal!
You’ll want someone who knows the market like the back of their hand, and has worked extensively in your target area. They should have relationships with all the right professionals – inspectors, title companies, mortgage people, and more.
A great realtor can be a fantastic asset… they will help you navigate the choppy waters of a hot market. A bad realtor will slow the process down, give poor advice, and frustrate the seller’s agent. Work with the best person you can find!
For tips on finding a great realtor, check out this article.
3. Know Your Numbers in Advance
First, understand your own budget. Determine how much you can afford to pay each month for your mortgage, and what a lender will give you. Set hard limits for what you’re willing to pay, and be ready to pounce when you find something that fits.
Secondly, understand the market. If you’re looking for a 3 bedroom house in a particular Grand Rapids neighborhood, research that area thoroughly. Figure out what houses have sold for recently in the area, and what a ‘fair’ price is for a property (given the current market).
Once you have these numbers figured out, you will be much better prepared to make a quick, solid bid. It allows you to identify a great deal right away, and submit a confident offer before someone else snatches it up.
4. Understand Seller Preferences
Remember, sellers want a high offer price and no headaches. Each element of your offer will rate better or worse based on the ‘possible headache’ scale.
A cash offer is better than a conventional mortgage. A conventional mortgage is more attractive than an FHA, VA, or Rural Development loan, because there are fewer requirements the buyer needs to meet.
An offer to buy the home ‘as-is’ (without any inspections) is the best option for the seller. From their perspective, the fewer contingencies, the better.
Most people hope for a quick sale, so a short inspection or appraisal period often makes for a superior option. However, some sellers will want a little extra time to move out of the home. Offering flexibility with your closing date is a good thing.
By understanding what the seller is looking for, and creating your proposal accordingly, your offer can move to the top of the pile.
Of course, what’s best for the seller isn’t necessarily best for you. Don’t put yourself in a bad situation by getting too caught up in a bidding war. Understand your own situation, and craft the most attractive offer possible based on YOUR needs.
5. Move Quickly
Once you have done all of your homework, be ready to move fast. If a house hits the market, look at it as soon as possible. If you know it fits everything you’re looking for, don’t wait two weeks to submit an offer.
Don’t panic. However, move quickly! The first offer is often accepted, so don’t be afraid to be ‘hot out of the gate.’ Just be ready, and when the moment arrives, follow through with speed.
6. Choose the Right Offer Price
In the end, offer price is the #1 consideration for most sellers. So think carefully before choosing your number.
In a competitive, hot market like Grand Rapids, you have a tough choice to make. Make a lower, more buyer-friendly offer, and potentially risk losing the house. Or, come in with a ‘highest and best’ price with your initial bid, and increase your chances while raising your monthly payments.
Conventional wisdom says that you should come in fast, hard, and high. However, that often leads to buyer’s remorse. So stick to the numbers you set in advance (see #3 above).
If you have room in your budget, and you love the house, go for a strong bid. But if you know you’ll have other options available, and a higher buying price will hurt you financially, stay with a more sensible offer.
Conclusion
A successful offer in a hot market like Grand Rapids is built on knowledge and preparation. Understand your own financial situation, and the realities of the current market. Work with great professionals, and be ready to strike when the the right house pops up.
Understand what sellers want, and craft your offer to make it as attractive as possible. However, don’t put yourself in a bad situation just to grab a specific house – there are always more available.
So be smart, active, and ready – you’ll find a great one!