As I’m writing this, 30-year fixed mortgage rates stand at 7.23%, the highest since 2001. Logically, such a high rate would mean that house prices go down since people would be less inclined to buy and sellers would need to drop prices to entice prospective homebuyers. However, we’re living in a bizzarro world where demand for housing is still up, prices are still elevated, and homeowners aren’t selling. In short, the real estate market is clogged up and there’s not a plunger in sight. Just take a look at the Atlanta Fed’s Home Ownership Affordability Monitor.
With that being said, if you’re looking to buy a home right now, you’ve learned that the traditional route of buying a home (taking your time, putting down 20%, conducting an inspection, negotiating with the seller to make improvements) has been shattered. At this point, you have four options:
- Settle for a dilapidated home with no air conditioning and only half a bathroom
- Buy a reasonable home but waive inspection and risk the chance of life-shattering expenses down the line
- Go outside your budget for a house that isn’t even your dream home
- Delay your search completely
All the options are depressing. But if you have to buy a home, there are several actions you can take to ensure a better chance of success.
Hire an amazing agent
In this market, you can’t settle for an average agent. After all, you’re relying on this person to guide you through a real estate jungle that’s filled with hazards at every turn. A rockstar agent knows your neighborhoods of interest like they’ve lived there for their entire life, stays well-connected to other professionals in the area so they know what might be coming to market (including off-market listings), and serves as an expert negotiator for when the time comes to make an offer and beyond.
To find your rockstar agent, ask people you know if they have anyone in mind. Also use sites like Google and Zillow and check their reviews. Lastly, don’t be afraid to move onto the next agent if the one you have isn’t working out.
Get pre-approved for a mortgage
Timing is everything in a hot market: the longer it takes for you to make an offer, the smaller the chances that you’ll land the house. That’s why you need to get pre-approved for a mortgage before you start looking. A hot market means that lenders are getting many applications which means potentially longer approval times. Additionally, a mortgage pre-approval shows the seller that you’re serious and ready to buy now.
Look for homes under budget so you can offer above asking
I know what you’re thinking. Every home you’re interested in is pushing your budget to the limit. But consider this, if every house is seemingly selling for above the asking price, you’ll be in a better position to offer the same if looking at a house well within your means. Adjust your Zillow filter to look for houses that are priced 5-10% below your max budget. (If you’re super ambitious, go to 15-20% lower.)
Search for homes in unconventional ways
If you’re wading through Zillow or the MLS portal from your agent, you’re fishing in the same pond as everyone else. As I mentioned earlier, having an agent that can potentially find off-market homes is one way to squash competition. Another method includes finding neighborhoods/homes that you’re interested in and sliding a letter of interest in the mailboxes. Additionally, you can consider searching for homes that are part of foreclosures, divorce settlements, or estate sales. In short, turning over the rocks that fewer people are willing to turn over means you have a better chance of buying the home you’re looking for.
Negotiate with creativity
If you can’t find much below you budget, you’ll need to get creative. Why? Because looking for a home near the top of your budget means you can’t afford to offer much more money. This is where you and your rockstar real estate agent need to huddle up, think outside the box, and sweeten your offer in different ways. Learn more about the seller. How quickly do they need to move out? Do they want some assurance that you’re not going to bail out of the offer?
Be mentally prepared
Searching for a home can feel like a full-time job even in a cool market. These days, you probably wish you could take off from work for an extended period so you can hop from one available home to the next in an instant. By acknowledging to yourself that the home search may be disappointing, frustrating, and hopeless at various points, you can stay more resilient when those feelings arise. Moreover, your agent should be there to coach you through the process, giving you doses of realism mixed with heaps of encouragement.
The above actions aren’t exactly cheat codes, but they reinforce that there are several factors within your control. And for the most expensive purchase of your life, you can’t afford not to take action because action is the only way to put yourself in the best position to succeed in a hellish market.
Good luck!