3 Tips for Buying a Home
Three Tips for Buying a Home and One Mistake to Avoid
In the current sellers market that we find ourselves in, it’s as important as ever to be informed and educated as a buyer. To gain some understanding of the current Real Estate climate we are in is to understand how balanced the playing field is between buyers and sellers. The main measuring stick that has been used is “months of inventory”, meaning, if no new homes hit the market and the buying rate continues, how long will it be until all the houses are completely gone. In a balanced market, a healthy number would be six months of inventory but in Dane county we are currently at 2.5 months of inventory (in all price points), meaning we would need roughly 2.5X (it’s actually 2.4) the amount of houses on the market than we currently do just for things to be even. All that to say, sellers currently have an advantage in the Real Estate transaction, but there are a few things you can do to put yourself in the best possible position when looking for a home. Without further ado, here are three tips to buying a home:
1. Get Pre-Approved: With the lack of inventory we are experiencing, when the good properties hit the market they are also quickly taken off the market, with many properties receiving multiple offers. When you submit an offer and you're in that kind of competition, you need to be able to show that you’ve started that process and that your credit has been checked and that your debt to income ratio has been validated so the sellers have one less thing to worry about. To add to this, getting a pre-approval letter from a local and reputable lender is very important. Any experienced listing agent will recognize the ease or lack-thereof of the lenders track record and relay those concerns or optimisms with the sellers when presenting offers.
2. Available Schedule: I’ve mentioned it several times already but with the fast paced market we are in, it's very important to have some flexibility in your schedule to view homes. We all have lives to live and you need to live yours but assuming trends continue, many homes will sell in a matter of days or hours, so having some flexibility to sneak out during a lunch break or before work or quickly after work can be key to finding your dream home. It’s also important to consider when picking a Buyers Agent whether or not they work on a team or not. There will be times when an Agent's schedule won't line up with yours. But in my case, I’m on a team of six agents so chances are much higher that one of us is available to get you in the door, which is extremely important for you not to miss out on the perfect home.
3. Be Ready/Jump on it: To give a better visualization of the lack of inventory I’ve included recent numbers from the Wisconsin Realtors Association breaking down different price points and the months of inventory for each one. If you fall in the $125-200k price range, there is only 0.6 months of inventory. Keep in mind this is for the entirety of Dane county, things are even more sparse if you focus this to just Madison. There's a chance the right home for you may come across at the very beginning of your search, so having your ducks in a row prior (pre-approval) and having the mind set to pull the trigger with guns a-blazin’ when the right home does come across, is paramount.
Mistake to Avoid: I believe that the biggest mistake a buyer can make when buying a home is to work with an inexperienced agent or work directly with the listing agent. This market is fast paced and competitive and you need someone that knows how to navigate the waters and present your offer in the best light possible. An experienced agent will know how to adjust inspection and finance and appraisal contingencies in little ways to make your offer better, and when it's necessary or not to do so. Working directly with the listing agent is another error I see and hear a lot of people make. The listing agent has a fiduciary responsibility to look out for and represent the sellers, their job is to net the sellers the most coin possible. A common misconception that drives these situations is the idea that if you only work with one agent, there will be less commission involved and you’ll get a better deal. Not to say that can’t happen, but generally, what happens in that scenario is that the listing agent gets to pocket the commission they were already getting, along with the commission that a Buyers Agent would be getting as well. There are exceptions to everything so please understand this isn’t set in stone or the way it always works, but more often than not, it is. All that to say, if the commission is the same regardless, doesn’t it make sense to have someone in your corner rooting for you, searching for you, negotiating for you and looking out for your fiduciary interests?