Buying your first home can seem like a daunting task, especially in today’s low inventory market. Knowing where to start will help ease the process and make for a smooth transition.
Budget Tips for Buying Your First Home in a Low Inventory Market
According to a recent TD Bank survey, less than half of first-time home buyers create a budget before starting their search. In a low-inventory housing market, it’s crucial to have your finances in order ahead of time. Here are some budget tips to keep in mind:
Know your credit. Your credit score plays a crucial role in determining the amount of your loan and the interest rate you’ll pay on it. Higher credit is better; boost your rating by paying your bills on time and avoiding any large purchases right before starting your home search.
Talk to a lender. An experienced lender will be able to walk you through how much the bank is willing to lend you, based on your finances, and how much of a mortgage you can comfortably manage.
Know your limits. Low-inventory markets feature a lot of competition, so it’s important to factor in the possibility that other buyers will try to outbid you. With a solid budget in place, you’ll know exactly how much you can bid on a home without getting in over your head.
Choosing a Real Estate Agent
Low inventory real estate markets bring many challenges that require guidance from an experienced expert. Here’s how to recognize the best real estate agent for first-time buyers in competitive markets.
They help buyers win. When home inventory is low, it becomes a seller’s market where buyer competition can become intense. To land your dream home, you need an agent who can give you an edge on other buyers by placing bigger, more earnest deposits, waiving contingencies when necessary, and putting in escalation clauses.
They are familiar with the area. In low inventory markets, it’s especially important to work with an agent who specializes in the specific area you are targeting. Their specific inside knowledge can help you assess specific properties and neighborhoods so you can make decisions faster than competing buyers.
They streamline the process. You can’t waste any time in highly competitive markets. The right real estate agent can make you more agile by quickly showing you newly listed homes, helping you write an offer, and acting as a liaison with the seller’s agent.
Neighborhood Considerations
Choosing which neighborhood to focus on is one of the most important steps in the home buying process. Here are some neighborhood-related questions first-time home buyers should ask when starting their search.
Is it convenient? You may fall in love with a particular house and be tempted to overlook the fact that it’s not located near your office, doctor and so on. But the inconvenience of living far away from everyday services may soon start to weigh on you. Try to balance the appeal of a house with the ease of access it provides to your basic needs.
Are the schools good? Buying a house in a neighborhood with a strong school system (even if you aren’t planning to use it) is a good investment, as it automatically increases the value of your home.
What does future development look like? Do a little research into planned developments (such as new housing or roads) in your chosen neighborhood or area, so you know what to expect and can anticipate how the changes may impact your home value.
Open Houses
A successful open house can help you spark a bidding war, especially in markets with limited inventory. Make the most of your open house with these proven tips for house viewings.
Depersonalize your home. Prospective buyers want to be able to visualize themselves living in your home. Remove family photos and other personal items as much as possible.
Streamline the experience. In addition to cleaning and staging, you should make sure your driveway isn’t blocked, keep the house well-lit and provide snacks for buyers. You should also have packets ready for potential buyers that include inspection reports, records of work done, positive points about the house and other relevant details.
Get the word out. What good is an open house if no one knows about it? Make sure you are working with an ERA-affiliated agent who knows how to advertise an open house through real estate websites, social media, traditional signs, community ads, local bulletin boards and word-of-mouth.
Putting in an Offer
Getting your offer noticed by sellers in a low-inventory market with a lot of competition may seem like a daunting prospect. Here are a few suggestions to help make your offer stand out from the crowd.
Be prepared to move fast. Understandably, sellers are more open to offers that enable them to close as soon as possible. Make sure you’re ready beforehand (ideally with a pre-approval or even a mortgage underwriting from a lender in place), so that you can submit an offer immediately.
Submit an earnest money deposit (EMD). A “good-faith” deposit shows the sellers that you’re serious about buying their home, which goes a long way in terms of making your offer more appealing.
Work with a trusted real estate agent. An experienced agent knows the ins and outs of the buying process and can provide invaluable advice on what it takes to make the best offer in a tight market. Great agents are also clued into the market and can make you aware of new listings immediately – a huge advantage when time is of the essence.
Home Inspections
Just as appraisals help protect mortgage lenders, inspections help safeguard the interests of home buyers. Here are some tips for getting a home inspection before buying a new property.
Make it official. It’s not enough to verbally tell a seller you plan to get an inspection before closing. You need to work with your real estate agent to have it written into the contract as a contingency clause. This will dictate that an inspection must be performed for your real estate contract to become binding.
Temper your expectations. Although home inspection reports are detailed, they don’t cover every nook and cranny. Most importantly, you want to get a thorough assessment of the foundation, roof, plumbing, electrical system and other key issues that might cost a lot of money to repair.
Hire the right inspector. Not all home inspectors have the experience and expertise to thoroughly evaluate a property. The right real estate agent will have experience working with numerous inspectors and should be able to recommend a reliable, reputable professional.
