From the moment Mandie and Albert Spear saw it, the four-bedroom, two-story house in a middle class subdivision felt like home.
It had a dining room. A living room. A kitchen. And a den.
It was 1,900 square feet with a spacious fenced-in backyard, painted bathrooms and a coat closet with a seat.
Perhaps the biggest boon of all: It fell below their $250,000 price max.
“We were told we were the preferred buyer,” says Albert Spear, 28, who works in marketing at a TV station. He and wife Mandie, a 26-year-old graphic designer, had spent three months looking for their starter home.
They thought they found the perfect one. And though the house lacked the one feature Albert vied for most — a garage — they seized the opportunity and submitted an offer.
The next day, the house was gone — snatched by a buyer with a bigger offer, bigger family and cash in hand.
“The seller obviously wanted to get as much as they could because they knew they could,” Albert says.
Now the Spears, who in three years of marriage have been perpetual renters (first an apartment, now a townhome), are back to square one.
That means touring more houses with their real estate agent (they’ve viewed about a dozen so far) and poring over emails everyday that contain listings matching their criteria.
Welcome to the world of home buying in many cities today, where the demand is high but the supply of homes is limited.
Thawing itself from the recession-era crisis, the U.S. housing market is on the rebound and several economic forecasts suggest 2016 will be an especially hot homebuying season.
Existing home sales in March went up 5 percent from February, and 1 percent from last year, according to the National Association of Realtors. Jonathan Smoke, chief economist for Realtor.com, predicts that this could be the busiest spring buying season in a decade with many leftover prospective homebuyers from last year joining this year’s crop.
Competition for new listings coming on the market is heating up as low rates and great weather lead to fast sales https://t.co/K3Mrhwyf1R
— Jonathan Smoke (@SmokeonHousing) April 18, 2016
It all adds up to a seller’s market just as scores of hopeful homebuyers come to the bargaining table.
That makes things tricky for would-be buyers like the Spears, who say some sellers they’ve encountered aren’t pressed to make necessary repairs before putting their homes on the market.
“They know they don’t have to,” says Mandie Spear, after describing one house that had few up-to-date renovations, and squeaky kitchen drawers. “They can still sell.”
So how do you survive house buying when the heat’s on, the competition is fierce and the sellers have the upper hand?
Tip 1: Get pre-approved
First thing’s first: Get pre-approved for a mortgage so you know just how much house you can actually afford. Not only do most sellers look for some sign of pre-approval and good credit but having that letter from your bank or lender puts you in a better jousting position should a bidding war erupt.
Ask your lender if it will underwrite your application upfront, before you’ve selected a house, to make sure financing is a solid as possible.
“If somebody comes…without a pre-approval and there are 10 offers, and somebody else is coming in with a strong pre-approval…they’re going to win,” says Debe Maxwell, a broker with Savvy & Co. Real Estate in Charlotte, N.C.
Pre-approvals carry more weight than pre-qualification, which is far more informal and only provides an opinion for how much money you might be able to borrow, says Movement loan officer Jessica Babinski.
A pre-approval with upfront underwriting is stronger, she says, because it signifies that a lender has scrutinized your finances, and it signals to the seller that you’re serious about buying.
There’s a big difference between prequalification and preapproval. Make sure you know the difference! https://t.co/be0tLfyzFs
— Mike Castle (@mikecastle01) April 12, 2016
Tip 2: Hire a good real estate agent
When you’re in a hyper competitive housing market, an experienced real estate agent could become your best friend.
They can perform intensive searches for homes that fit your specifications, and possess up-to-date knowledge on your city’s housing inventory. A good agent will often know a property is coming available, long before it shows up online. Plus, they can help you navigate the pitfalls of finding a house when options are few.
If you find a house with multiple offers, going it alone could be disastrous. You need a partner who’s looking out for your best interests. Says Maxwell: “You’ve really got to have somebody who has been in that rodeo.”
Tip 3: Get credit help
Find a good mortgage loan officer at least a month or two before you start house hunting. An experienced mortgage professional can detect blemishes on your credit and help you fix them, Babinski says.
She’s not a fan of online services, such as Credit Karma or FreeCreditReport.com, which only pull consumer credit reports. Lenders use different metrics to assess your risk as a borrower, meaning the information they collect could be different from what you get on your own.
“Your Experian credit card score is not going to be the Experian score that I’m going to pull,” Babinski says.
Tip 4: Tug at the heartstrings
People love a good story. People selling their houses are no different.
One way to win over a seller is to appeal to their sentimental side by including a personal note or letter with your offer. Give them an idea of who you are, why you like their home and how it’s the perfect fit for you and your family.
Tip 5: Be flexible
Your willingness to push back your move-in date — and even the closing date — could endear you to a stressed seller.
That might mean putting things on hold if the seller needs more time to move into a new place, or waiting until the school year is over so leaving home won’t be too disruptive for their kids.
On the flipside, it could also mean closing as soon as your offer is accepted.
“Putting on the offer that you’re able to close very quickly is a good selling feature,” Babinski says.
Tip 6: Be ready to adapt and compromise
Everything may not go according to plan. Remember the Spears?
They want to spend less than $250,000 on their first home and use any leftover cash for renovations and personal touches. It may not happen that way.
“We haven’t found…a house where it’s at our max and all upgraded because I guess it is a seller’s market and they know they don’t have to renovate,” Mandie says.
The couple faces the prospect of buying a house they can afford and then waiting later to start on special projects. “We may have to live with what we can get,” Albert says.
Tip 7: Be ready to pounce
Be aggressive. And don’t miss out on chances to go for what you want (other buyers certainly won’t).
So when your real estate agent calls with news of a house and asks you to skip lunch or miss cocktails with coworkers after work, do it.
Buyers “just have to trust us and know that we know what we’re talking about,” Maxwell says. “Jump on it and strike while the iron’s hot.”
Again, the Spears, who have learned that if they find a house they like, they need to be ready to make an offer, with cash. Case in point: Their recent visits to two homes they liked.
“They had both been on the market for about a day and they already had offers when we went to go see them,” Mandie says. There was no sleeping on it or seeking advice from friends and family.
“We had to see it,” she says, “and make a decision.”