The U.S. economy has been hit hard by the Covid-19 crisis, but one sector that has held up well is residential real estate. According to the National Association of Realtors, 56% of homes sold in April were on the market for less than a month.
The strength has been fueled by pent-up buyer demand, low mortgage rates and tight housing inventories. With large numbers of prospective homebuyers coming off the sidelines, it is an extremely competitive environment. As a result, buyers have to be prepared to move quickly once they find the right home. Otherwise, they can be left out in the cold.
Here are seven ways that you can increase your chances for success:
1. Speed matters. Well-maintained homes that have been priced appropriately can sell in the first week on the market. If you really like a property, make sure you have an offer ready. The listing agent/homeowner likely won’t wait long, especially if there are other interested buyers.
2. Pick an experienced agent. Hire someone you trust who has a proven track record. When buying a home, you want an agent who is proactive and available 24/7. Find someone who will actively search for off-market listings. A top-flight agent usually has an extensive network of broker contacts who will share information about homes that are “coming soon” to the market. This enables you to get a jump on other prospective buyers.
3. Be prepared. Decide how much you are willing to spend. Find a good home inspector before you start looking at homes — someone who will be available to conduct an inspection on short notice. This can help facilitate a fast closing. Consider conducting a pre-offer inspection so that you can write a cleaner offer without an inspection contingency.
4. Get preapproved. Make sure you have a lender go over your finances so that you know whether you are eligible for the appropriate loan. It’s an easy process — you can usually submit an application online or over the phone. Once you are preapproved, you can move quickly when you want to make an offer on a home that you really like.
5. Expect competition. The market is very competitive, and the supply of homes for sale is limited. A Realtor.com report released in March showed that new listings were down 29% year over year. Multiple offers are becoming more common as the uncertainty surrounding Covid-19 starts to ease. More and more buyers have decided that it is safe to leave their homes to begin or resume their searches. Ask your agent how an escalation clause works, and be prepared to employ it in competition.
6. Prepare your down payment. The more money you can put down, the better. This signifies to a seller that you are a serious buyer, and not just kicking the tires. It puts you in a stronger bargaining position. That being said, you don’t want to overextend yourself by liquidating all of your savings to make an attractive offer. You want to have money set aside to furnish the home and pay for needed improvements or unanticipated repair costs after you move in.
7. Patience can pay off. Homes that have been languishing on the market can present excellent buying opportunities. Sellers are more likely to negotiate on price, especially if they’ve already bought another house and are paying two mortgages. Additionally, you will potentially have more options if you don’t rush into a purchase. Many sellers pulled their homes off the market in March and April when the pandemic precipitated strict stay-at-home orders. Over the next few months, a number of sellers will likely relist their properties.
While concerns about the economy are likely to last for the foreseeable future, real estate remains a great investment. Historically, home values have increased significantly every decade and usually aren’t subject to the same short-term volatility as the stock market. Homeownership provides tax benefits and is a fantastic way to grow your personal wealth. Most importantly, it’s nice to have a place that you can call home.