Now that interest rates and home values are increasing at a somewhat steady rate, you might think that market conditions would start favoring the buyer. Despite recent changes, the market remains highly competitive among buyers. When market conditions are favorable for buyers, you likely won't encounter much competition while you search for a new home.
On the other hand, a competitive buyer's market typically leads to the seller receiving multiple bids and having more power during negotiations. Even though buying a home in a competitive market is more challenging, it's certainly not impossible. Here are some tips on how to win when searching for a new home.
The first thing you should do before you begin to search for a new home is to seek preapproval from your lender. The preapproval letter you receive tells you how much you can afford and shows sellers you're serious about buying a new home. Some sellers will only offer tours to potential buyers who are able to produce preapproval letters.
Make a Strong Initial Offer
The most important thing to remember when you're searching for a home in a competitive market is to make a strong initial offer. There's a good chance that the seller of the home you're interested in will receive multiple offers because of how competitive the market is. In this situation, you'll likely need to make an offer that's at or above the listing price. A few additional steps you can take to strengthen your offer include:
- Waive most contingencies
- Look at other offers the seller may have turned down
- Add an escalation clause to your offer
The contingencies mentioned above are protections that allow you to back out of the contract you signed without any legal consequences. Because of how important these contingencies can be, this option should only be used as a last resort.
Don't Rush into a Purchase
While you should act quickly once you've found your dream home, you shouldn't rush through the initial search. If you find yourself competing with other buyers for a new home, don't push yourself to outbid all other buyers. Even though a strong offer is needed, it shouldn't be more than you can afford.
Buying a home in a competitive market is possible if you pay attention to the tips and guidelines mentioned above. If you receive a preapproval letter from your lender, you should be ready to start your search. Once you've found the home that you'd like to live in, don't hesitate to make a strong offer. With the right approach and the right real estate professional by your side, you can be a new homeowner in no time.