In many markets across the country, the number of buyers searching for their dream home greatly out numbers the amount of homes for sale. In my home market of San Diego, the starter home and move-up homes for sale are few and far between and it’s creating a gladiator style bidding war of multiple buyers on homes for sale. Forget days, homes are selling within hours of being placed on the market. As an example, a friend had a scheduled three day open house two weeks ago. Within the first few hours of the first day of that open house, they had multiple offers with an acceptance before the clock struck midnight. This kind of competition has led to a marketplace where buyers need to stand out. I invite you, over the next three minutes, to allow me to share with you what works and why.
Step 1: Get pre-approved for a home loan BEFORE starting your home search – streamline, efficiency, qualified.
No doubt, buying a home requires a lot of paperwork. The majority of the paperwork drill comes from financing. Be proactive with a mortgage professional to complete your financial review and get pre-approved. Completing this important first step will allow you to develop a financing plan- goal price, maximum qualifying amount for negotiations, ensures loan product is compatible with property type, and down payment strategy. Having this plan in place will streamline your home search focus and allow you to be nimble and act quickly when the perfect property comes along. Even if your market is not as competitive as San Diego’s, knowing your budget will give you the confidence of knowing if your dream home is within reach or what steps/actions you need to take to get there.
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.” ~ ‘My Home’ by Freddie Mac
Step 2: Work with a professional – knowledge, availability, team approach
I know this seems obvious…of course you must work with a lending professional to get a loan…but not all are created equal. Have you ever had a simple question with any large service provider and had to navigate through 15 different teleprompts? Yeah, me too. I just want to ask a question- ugh! Applying for a loan can be confusing and at times counter intuitive. Work with a professional that will take their time and guide you through the process of picking your best loan options, help you understand the process and answer all of your questions in step #1 above. This professional must also be able to work as fast as you need them during your home search and even faster once you find your dream home. A few questions to ask:Does your professional give you a direct line to contact them, or do you have to go through a phone tree?
Are there pre-approval letters specific for the offer you are making or do they spill your maximum home price killing your negotiating power?
Do they contact the Listing Agent once you’ve submitted an offer to buy to ensure the seller understands your financing terms and has no question on your ability to perform and obtain a loan?
Step 3: Go Fast – advantageous, nimble, acceptance
Sellers are in the driver’s seat selecting the best and highest offer because, well, its a sellers market in most areas and they can. A ‘sellers market’ is defined as home inventory levels are below a six month supply. As you can see from this graph from the National Association of Realtors, we’ve been under six months inventory for at at least the last two years. Be bold – you must
Have the confidence to be brazen so your offer stands out among the rest. There are lots of ways to sweeten your offer that a Realtor can discuss with you, but in regards to your home loan, there are two main areas…appraisal and loan. Lessen the time frames needed and show the Seller that you mean business – you want their home as fast as possible! Remember, the Seller wants to sell their home at the highest price, with the least risk of a buyer not performing, in the shortest amount of time.
The appraisal time frame in real estate contracts is normally 17 days. With most loan programs, you can shorten this window significantly. You can even forgo the appraisal time frame all together if you feel your are paying a good price for the home and you have a significant down payment. The bank will still need to get an appraisal done, but it doesn’t have to be part of your purchase contract.
This same option is available for your loan time frame. Real estate contracts state this period is 21 days. If you’ve done Step #1 and you have a true professional (Step #2) on your side, you can cut this drastically. There is no reason with new loan techniques and technology available that this time frame can’t be reduced in half. There are even programs available that allow an entire loan to close (including appraisal ) in 10 days…yes, TEN days! At my company, Synergy One Lending, we call it the “10 Day Close”. Whatever its called at the bank of your choosing, your finance professional can tell you how quickly you can close your loan and use that information to your advantage when placing an offer.
If you are a Buyer and want to sweeten your offer to purchase a home, these hacks work! I’ve helped hundreds of families buy their first, second and even fifth home. I’ve been in the mortgage industry for over 12 years and I’ve seen all types of markets. No matter your market situation, I can’t stress enough to have professionals on your side that can share with you the loan hacks you need to be on top of the market and stand out among the crowd. What’s the worst that can happen when you set yourself up for the best chance to get your dream home?