The real estate market is red hot across the country as we say goodbye to 2020 (whew). The market sees newly listed homes selling within days, and in some cases, even hours. If your financial goal is to sell a home without much hassle, then the time is right. However, will buyers be able to purchase a home at a reasonable price next year? “Should I buy a house right now?” is a question a lot of people are asking.
It’s worth a moment listing the reasons why buyers are in a frenzy to purchase a home right now, whether first-time homebuyers or previous owners. The three primary reasons why the real estate market is exploding:
- Historically low-interest rates.
- A real desire to go bigger
- Fear of missing out
You can afford a more expensive house
Based on various current economic conditions, mortgage rates continue to be incredibly low. This means you can afford a more expensive house, and keep your monthly mortgage payment at a reasonable level. Consider this – the principal and interest payment on a $250,000 house with a 30-year mortgage at 4% is $1,193. Today, interest rates on a 30-year mortgage are now around 3%, which means you could theoretically get a $283,000 house on a 30-year mortgage for the exact same payment of $1,193.
Asking yourself should I buy a house right now? What can $33,000 in an additional house buy you? There are all sorts of possibilities. Maybe you want to move into a different neighborhood, buy a new home, or go big and buy your dream home.
The idea that the same payment can now buy you more home is incredibly appealing and low-interest rates sweeten the pot for potential buyers.
Here is the way a lot of buyers see the market going into 2021 – if you’re going to be living and working out of the same house for the foreseeable future, you might as well be inside of a place you really like. This seems to be the prevailing sentiment among those Americans who haven’t been nearly as directly impacted by the CORONA VIRUS and uncertain economic times.
There is security in buying your dream home
There’s a higher level of comfort and stability that comes with making your home exactly how you imagined it, whether you have to move to reach that dream, or you simply renovate or improve your current property.
As 2020 comes to a close, people are in a frenzy buying houses right now because other people are trying to purchase the same one. There’s a fear of missing out on something that is perceived to be good. The real question is whether the time is right for you to get top dollar for your home.
If homeownership truly is a goal for you, make sure you are ready to compete with other potential buyers. Make saving for a down payment a priority, and then make sure you have an emergency fund as a backup. The worst thing you can do is buy a home without emergency funds available if you need them.
Navigating a competitive market with trusted advisors
If you’re ready to take the plunge, a good place to start is learning how to position yourself as the most attractive buyer in a handful of offers.
Think of your real estate agent and loan officer as the foundation of your home-buying team. They support you through the whole process and are the people you will rely on. Part of this trust is a requirement for you too. Honesty is the best policy when we are dealing with a big purchase and legal contracts.
If you’re getting financial help from family for the down payment, let them know. If there is a strict timeline for when you need to be out of your current residence, let them know. These details are crucial in their being able to properly support you and get the deal done.
Get pre-approved to start the process
There’s power in being pre-approved in this competitive housing market. This helps home buyers figure out what their home purchase price point is, so they know what price range they should be looking in.
Getting pre-approved requires financial documents such as bank statements, pay stubs, and tax returns ready for your loan officer. This way, they can give you a pre-approval letter that comes with a firm commitment to lend them money, giving you and your offer a potential edge over other buyers.
Most home sellers want a smooth transaction with a qualified buyer and a contract with a strong chance of closing on time, and without roadblocks.
Be ready to move fast
Once your pre-approval is completed, you’re ready to look at homes – here’s where timing can be everything. It’s not only you who needs to be ready to move fast; your real estate agent and loan officer need to be ready, too. If you wait too long to look at a prospective home it’s likely a sale is already pending.
Figure out where you can be flexible. Two of the most effective tactics home shoppers can leverage to win a bidding war are price and terms. Determine what your highest competitive bid is, and then decide on your terms.
The final touches
Cover letters are one way to communicate directly with the seller and stand out in a field of bidders. This is your chance to let the seller know why their house is perfect for you. Is this your dream home because it shortens your drive to work and lets you spend more time at home with your family? Appeal on an emotional level with the seller.
And while you might go through this process a handful of times in a competitive market, this can be an exciting and positive process. We may have some obstacles, but everybody overseeing the transaction is an expert in their own way, and they’re determined to help you come across that finish line.