FOR the past year or so there has been real signs of the inventory of houses for sale to be really low, in fact all time lows. Usually an average city hold about a three month inventory of homes for sale, that means, if within that three month period all of the existing houses were to sell and no new inventory will arise, the houses for sale will dry up that area. But the past six months to a year inventory has been between 1-3 months depending on the areas.
We all know now that every new listing of homes for sale is being over bid by investors and cash buyers and most homes for sale if descent priced are getting multiple offers. So, what do you do if you are a buyer with a minimum down payment but very qualified?
Should I overpay for a house because of the shortage of homes on the market to choose from right now. My answer has been and will always be NO. I cannot justify anytime where overpaying for a house is a viable option. Buyers are panicking because they are not use to not having the multiple choices of houses to choose from and sellers are trying to take advantage of it by pricing their homes higher than market value.
Agent will usually advise minimal down pay buyers to offer higher in order to beat out cash buyers and investors, sometimes that might not even work because sellers are aware that if you are a minimal down pay buyer trying to get a loan, you will have to go thru a lot of obstacles and loan underwriting conditions, appraisal issues before you might actually get a loan approval. So, sometime they are better off with a lower cash buyer offers that can close in less than 30 days.
So, you have to not only be very qualified to get your offer even looked at but you might also have to take an extra step trying to maybe get the attention of the sellers when you are viewing the property, show them that you are buying to occupy and you will love and take care of the home. Easier said because most of the time you might not get a chance to meet the sellers when the agents are there. So, you have to think outside the box, go on weekends of course with the agent’s permission, and send a letter of interest to the sellers with your offer.
Agents will also sometimes request for all contingency to be removed quicker than normal to show that your offer to buy and get financing is really strong. Ask your agent for special tactics, they cannot just write an offer and submit to hope that you offer will be accepted. Remember, there will always be multiple offers for better properties so how can you stand out?
My advise, is not to chase after a price, because I have been noticing more properties have been coming out for sale, more inventory to come specially due to mortgage rates climbing over 1 percent in the recent months. You will notice more open houses on the weekends and more sellers will start to come out thinking that this might be a good time. The problem with that is we might get into a reverse situation now where you will see buyers take a step back and sellers continue to come out to sell. That will now create a little levelness to home prices, its been going up too fast for only one reason which is not suppose to be that way.
So, no you should not be overpaying for a house in this market and if your Realtor is recommending it because of the limited inventory, tell them you will wait but still be actively looking with them. The agents fear is that you might go to another agent so let them know you will stay loyal but you need to be in the right home at the right price. Do not settle just because you have seen too many houses, a house will be your home once you move in to it and care for it, but if you settled for a house just to live in it will never become your home.
Good luck and be wise in your negotiations, please call Ken Go of 1st innovative Finance for your home mortgage and real estate needs, call (562) 697-7028 or write to [email protected].
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Thanks for all your support and Comments, please call Ken Go of 1st Innovative Finance at (562) 697-7028 or write to [email protected] for further inquiry in getting the best loan for you.