Dear Monty: Seven tips for buying in an overheated market
Reader Question: We live in a market that is overheated. Home sellers are receiving multiple offers very quickly after listing and sell for more than the list price. We want to buy a home here, but we are reluctant to jump in and end up overpaying. What, if anything, can we do to avoid this situation? John and Kate C.
Monty’s Answer: When demand exceeds supply the sellers have an upper hand. However, it is common for individual listings to expire unsold or experience far longer than average market times in these same overheated markets. Here are tips you may find helpful.
Find a good real estate agent
In the case of the overheated market, laying out your expectations to real estate agents and carefully observing their reactions will be telling. Many agents are looking for the low hanging fruit and will see your requirements as a time-consuming proposition. Your first task is to identify several candidates and interview them. Learn how to find the best agents here: Https://dearmonty.com/finding-the-right-real-estate-agent/
Be aware some agents may suggest your plan will not work. Two specific searches in the MLS will determine whether or not they are correct. Ask the agents to research how many listings have expired in the past six months and how many are actively on the market over 90 days. If properties are not expiring, and all homes are selling quickly, the agents are right. If they are correct, consider other types of property as a two-family or a commercial property with living quarters above. On the other hand, if the searches turn up inventory, those agents may not be looking at the market correctly. Ask all finalists for the same information to observe if their answers match up.
Put your future offer at the head of the line
You want a “pre-approved” letter from your lender. Shop for your lender like you shop for your agent. Here is a link to https://dearmonty.com/finding-a-home-mortgage/ that demonstrates an efficient method. You also want evidence you have sufficient down payment funds. When interviewing agents, also ask each of them what else they suggest getting to the front of the line.
The area tour
The area tour provides two distinct functions; final agent selection and neighborhood selection. This area tour will demonstrate much about what these neighborhoods offer and how each agent delivers their expertise:
Set appointments with each finalist to view a typical home in each sub-market.
Driving to appointments provides a better visual sense of the surroundings.
Allow adequate time to view each property and spend time with each agent.
Ask the agents for sub-market data on each neighborhood.
Ask each agent to commit to a predetermined showing each week for ten weeks.
Validate a positive transition is underway in changing neighborhoods.
Share this plan.
Be somewhat flexible
By discussing the features that are most important now and reaching an agreement, it can save valuable time when making a purchase decision. For example; Do you need a dining room? Review the list of requirements and rate the value of each one. If you find a home that has everything you want except the dining room, moving forward becomes faster and easier.
Look places others are not looking
Remember the homes with your desired amenities that have expired unsold? Active extended-market-time listings also fit in this bucket. Ask the agent for a list of a few of each type that may fit your requirements. Tell them you will drive by and let them know if you would like to see any of them. The agent can check if the expired sellers will still show it. This approach can work, but many real estate agents do not take the time to ferret these properties out. There is a reason each property remains unsold. Now you can decide, without the pressure of competition, if you can deal with that reason.
Turn the search into a game or an adventure
These tactics do not prevent you from viewing homes in the hot neighborhoods. Some of these properties may be in the hot neighborhoods. What these choices accomplish is to open market segments to you many people have passed over or will not even consider. You have invested time in finding the right agent; you are prepared to act; you have a pre-scheduled time to look, and it may not be long until the right fit reveals itself to you.
Richard Montgomery gives no nonsense real estate advice to readers most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.