Inventory continues to be very low and sales are reaching levels near those at the peak of the market in 2005. Over the past few months in working with buyers I have found that you can still get what you want if you are prepared and know what a buyer has to do to be successful in this current market.
Just in the last few weeks, some of the buyers I have worked with have experienced what I’ve been writing about but were still surprised by what happened even though I had tried to warn them in advance. Being unsuccessful in their cases was not because we didn’t find something they liked but because they made mistakes which let another buyer get to contract on the home or condo they wanted. Let me explain the mistakes I’ve seen as being the most common ones so you can avoid them.
Uncertainty on Exactly What You Do and Don’t Want
When you have any uncertainty on what you do and don’t want then you will have a more difficult time being decisive about homes or condos you go to see. This can result a situation where you think back about a home or condo you saw previously and realize it would have been the right one for you – but then discover it is now under contract.
The ability to be decisive – to say yes or no without hesitation – is probably the most important skill for buyers in a market such as this one. This comes from having worked out what is non-negotiable (must-haves and must-not-haves, if that is a word) as well as a list of features that you would like or would prefer not to have but can have some flexibility on.
To help you with this I have put a form together which you can use. Click the screenshot of the first page below to open the full 3 page checklist and then you can save or print it for your personal use (you will need Adobe Reader to do this):
Use this form to get a more accurate description of what you really need and want so that you have it clear in your own mind and can communicate this more clearly to your real estate agent. If you know what you do and don’t want then when you start looking it will be easier to say ‘no’ to properties and to use the form as a guide when you are uncertain about a property.
Being able to decide quickly that something isn’t right is as important as being able to decide when something is worth submitting an offer on fairly quickly.
Get more certain about what you need and want to purchase so that you do not lose out on the right property when you find it because you can’t make up your mind.
Not Being Fully Prepared Financially
The other buyer mistake in this current market that often results in losing out on the right home or condo is when buyers have not gotten everything lined up for the financial aspect of the purchase, whether it involves getting a loan or paying cash.
You may think this only applies if you are getting lender financing for your purchase but I had 2 instances in the last couple weeks with ‘cash’ buyers where this came into play.
In one case, the buyer lost out on a condo they loved 1 day before they were going to back to see it a 2nd time with the intention of putting in an offer afterwards. However, even if they had put in their offer it may not have won out against the other cash buyer because they were getting their cash by refinancing their home and the letter from their bank had conditions of appraisal on their home, etc. Against a straight cash buyer, the other buyer would have most likely been the one chosen. Because of what happened we worked out a different strategy where they would not lose against another buyer.
In the other case, the buyer almost lost out to another buyer but that other buyer annoyed the seller in the negotiations and gave my buyer time to work out which way they would go to do a cash purchase.
For buyers who will be getting lender financing for their purchase, having a preapproval letter from a lender (or even better, a conditional loan commitment letter) before seriously looking at properties is an absolute must. If you don’t have this and you find a home or condo or townhouse you want to buy, you are at high risk of losing out to another buyer by the time you can get the preapproval or conditional loan commitment letter. If you are in the initial looking stage to work out what and where you will buy in the future this doesn’t apply. But even if you are at the stage of ‘if I find something I like then I will buy’ you had better be prepared.
Wrong Estimation of the Current Market
A lot of my clients have been receiving and reading my newsletters and are knowledgeable about the current market conditions but I do work with many people who aren’t. With some of those people, they think that the conditions of 2012 or 2013 are where the current market is and unfortunately they often find out the hard way that the current market conditions are quite different than what they were just a couple of years ago.
There is not an abundance of short sale and foreclosure ‘deals’; properties sell very quickly when priced reasonably; there is a significant shortage of property for sale; and sellers are less negotiable.
In this current market, a buyer can only be successful in buying by understanding the current market conditions for the local market and using the right strategies that work best for those conditions. This includes being prepared and acting quickly and decisively as described in the sections above.
“Things Won’t Change That Much in the Next Few Months So I Can Just Wait”
Actually there are a lot of changes that have already happened this year that can affect buyers and there are upcoming changes in the next few months that will also make the buying process different than it is now (and not in a great way). I have discussed this in previous posts but can go into more detail with you when you contact me.
“It Won’t Be Gone by Tomorrow”
If you’re not really ready to buy now then you’re not ready and shouldn’t rush into anything that isn’t right for you.
However, if you are ready, you need to realize that when you do find something you like you will need to be prepared to make a decision quickly. I wish it wasn’t that way and that you would have lots of time to decide, but I have had many clients who have found out the hard way that what I was telling them was true and missed out on the right property because it had been on the market for such a long time that it would never go under contract before they could decide – and then it did.
It is not just a risk of it going under contract while you are taking time to decide, it is also that by the time you do decide you may have other buyers you are then competing with which weakens your ability to negotiate. This is also the case if you take too long in the negotiation process. I had this happen recently where a buyer took too long in responding and counter-offering with a seller and another buyer came in with a better offer and created a situation where my client could not buy that property with the terms they wanted.
When you are ready to buy, let’s go over what you need to do to be prepared so you can be successful.