3 Tips for Buying in a Competitive Market

Although the competition of our local Tacoma market has eased off a bit since the dizzying buying pressure we experienced in the spring, we’re still in a highly desirable area and competition for good homes is fierce. Sellers continue to receive multiple offers, and buyers are regularly trying to outdo one another to be the party who gets accepted.

With that in mind, today we’re going to look at 3 essential tips that any buyer should take into account when house hunting in a competitive market.

Pre-approval

Get Pre-approved. This is one of the most obvious tips, but some homebuyers still start viewing properties before they’ve received a pre-approval letter from their lender. Getting pre-approved does two things for you. It clarifies for you the buyer how much house you can (or want to) buy. You'll get a real sense of the monthly costs and understand what price range to hone in on. It also puts a pre-approval letter into your hands so that you are not scrambling to get one together after you've found a must-have home.

It’s very important not to confuse pre-approval with pre-qualification. Pre-approval

When you’ve received a pre-approval letter from a lender this means that they’ve checked both your income and your debts to determine an exact amount that they would be willing to lend you. This is what you need. It shows that you’re serious, that you’re able to close reasonably quickly, and that you’re a reliable buyer.

Widen Your Scope

I am just going to say it: Most buyers lack vision. They drive from house to house looking for something that is perfect from the moment they walk through the front door. In competitive markets when inventory is low you’re potentially missing out on opportunities by thinking like this.

Consider properties that need a little bit of investment or repair to bring them up to the standard you’re looking for. Make sure you cost manage the upgrades properly and allow a little extra budget for unexpected issues and potential delays. Collect quotes from reputable contractors to ensure buying a fixer-upper will stay within your budget.

It’s obviously not ideal to move into your new home while it is a construction zone. But if you can deal with it for a while (or delay your moving date) then you will open yourself up to many more dream homes.

Be Ready

Contingencies can be a killer. The more "ifs" a seller sees with your offer the less attractive it will be. Removing contingencies can be risky, but by taking on some risk you are taking it off the seller and making your offer more competitive.

Arguably the most common contingency is having to sell your own home before being able to complete the sale. Needless to say, home sale contingencies are unappealing to sellers. You are essentially doubling all that might go wrong because you are doubling the number of transactions that need to make it through each of the steps; negotiation, inspection, appraisal, final loan approval, etc. If your home sale bumps off track, so does the seller's.

We know that it’s not easy to avoid this situation, but if you can find a way to do it - you’re going to massively increase your chances of having your offer accepted. Options include getting approved for both mortgages and taking on the risk of selling your home after you secure a contract for the new one. Having done this myself every time I have moved I can attest to the stress involved. Every day you own two homes is a day you are paying two mortgages. Another option is to sell your home before buying. It usually means you'll need to rent or stay with someone as an interim solution. In either case, you will make your offer more competitive.

Here are some other possible tactics

Protect the seller against a low appraisal buy agreeing in advance to cover the low appraisal amount in cash up to a certain point

Conduct a pre-inspection so that if no show-stoppers are found you can waive your inspection contingency. You can't use this one too many times. It gets expensive. But just know it is an option.