By MARSHALL MALONE
You have decided to buy your first house, and have already heard some good advice, which looks like this: begin saving early, know your budget, examine your credit, seek first-time home buyer assistance programs, compare mortgage rates/fees, get a preapproval letter and hire an experienced real estate agent. Before 2020, this was what you needed to know about preparing yourself financially before buying a home because in the U.S. 280 corridor, most homes sold nearly twice as fast at a 14 day average in contrast to 2020, which averaged in 31 days. Collectively, these homes sold for almost 9% more than they would have in the previous year, so this adds pressure on your lender, your appraisal and your wallet.
It’s a war zone in Birmingham real estate, and the cards are stacked against first-time home buyers. Homes are selling at lightning speed, and competing offers are coming out of the woodwork. So it is important when you send an offer to buy your next home that yours stands out above the rest.
So how can you bring your A-game? I’m going to be honest here; it’s money. Most sellers are looking to walk away with the most money and the least hassle. But here are a few tricks that can win you the house you want. While the higher offer carries a lot of weight, there are some things you can do to make your offer look better.
This assumes you have taken the opening advice. If you haven’t — stop here and come back to this when you do. This is how you need to truly compete:
When your Realtor hears the feared words, “this is a multiple offer situation…” you know that you are now eating at the adult table. It’s time to trigger your A-game because you are no longer holding all the cards.
Here are things you can do to make your contract worthy of a good hard look.
OFFER OVER ASKING PRICE
In the average scenario, you will probably be paying more than the list price. Your Realtor can give you an idea of what the house is worth in comparison to what the seller is asking, so that you can determine how far above asking price you can or should go. Have your Realtor do a comparative analysis to show you the top two or three highest priced similar houses. This should tell you what dollar amount the seller is trying to achieve. Often the seller has an inflated perspective on what their home is worth, and you need to identify your genuine stopping point so that you don’t go out of control. The past year was unprecedented in Birmingham for ridiculous offers, and 2022 is starting out in a similar fashion.
THINK LIKE A SELLER
There are many kinds of sellers, and you want to know where they are coming from. Have your Realtor investigate why they are selling. Are they downsizing to a smaller home, are they an investor who has just flipped the house or are they growing out of the house? Every buyer has their own objectives, and it is important to know what is important to them. If your offer caters to that seller’s needs, your chances increase. For example, a seller has just gotten a job offer out of state, and needs to move quickly. If your offer can expedite a quicker close, that might put you over the top with that seller. If you are not a cash buyer, going through the preapproval and underwriting process is one way to do that.
GO BEYOND PREAPPROVAL
When a seller is looking at two offers, one from a cash buyer and one from a buyer with a preapproval letter from a national mortgage company, they will go with the cash buyer. Lenders that you hear about on TV or podcasts are on their own timeline, and often sabotage deals because they are not ready in time for closing. A local mortgage lender is hungrier for your business, and they know how to fight on your behalf. Most real estate agents know the good lenders from the bad and it is important to let them advise you to find the right one.
Choose a local mortgage lender who can go beyond preapproval, and take you through underwriting. Lenders need to take an in-depth look at your credit and financial background to determine if you're eligible for a loan, and being able to do this prior to making an offer goes a very long way. This insures the seller that you are no longer a financial risk, and you can probably close much faster.
VA AND FHA LOANS
VA loans typically have lower interest rates than conventional loans and require no down payment. They also come without mortgage insurance costs, which limit your buying power.
FHA loans might be a good fit if you have less money set aside to fund your down payment and/or you have a below-average credit score. These have served a good purpose for a very long time, but it is important to know that a seller might frown on them because they either have ridiculous inspection criteria (FHA), or the program itself could run out of money at the most inconvenient time (VA). These details can lengthen the contract period, and can often
