The housing boom is real. Driven by a confluence of supply shortages and Redfin reported some truly discouraging statistics that show much how the market has tightened even since last year. Here's a bleak snapshot comparing the housing market in August with one year prior:, we may be living through one of the most challenging eras -- ever -- for home buying. And the data backs this up: Last month,
- Median home-sale price increased to $361,225, up by 16%
- Asking prices rose by 10%
- Pending home sales increased by 10%
- 84% of homes that went under contract had an accepted offer within two weeks of hitting the market
- Active listings decreased by 23%
Attempting to buy a home in this kind of market can feel impossible. And it's not uncommon for a prospective buyer to feel discouraged after being outbid on a dream house. But there is hope -- and there are proven ways to gain an edge when pursuing a new property. Speed will be crucial: The average home spends just 18 days on the market, so it's key to move quickly once you find a home you like. Here are a few ways to stay ahead of the pack.
Get preapproved for a mortgage
There's no time to waste in a competitive market, and mortgage preapproval will communicate that you're a serious buyer. Before beginning your search, reach out to a lender and let them know you're interested in financing. After collecting your employment history and income information, the lender will provide a letter indicating that you are preapproved for a maximum loan amount and interest rate. Preapproval doesn't guarantee a loan, but it qualifies you for financing as long as all of the documents you provided are accurate. You can learn more about preapprovals here.
Bring earnest money
When a seller accepts your offer, they'll take the home off the market in exchange for earnest money -- typically 1% to 3% of the sale price -- as collateral to prevent you from backing out of the deal. The seller deposits the money into an escrow account until closing and then returns it by applying it to your down payment. Although paying earnest money is customary, including it with an initial offer could make the difference. If you're serious about a home, consider asking your realtor to include a photo of an earnest money check with your offer. You won't need to produce the cash unless the offer is accepted, but this strategy lets the buyer know that you have the funds to back up your offer.
Rank your must-haves
Shopping in a competitive market can be discouraging -- especially if you're inflexible. When prices are high and inventory is low, it may be necessary to make concessions. You can improve your chances by ranking your must-haves. For example, if you have small children, your top three priorities might look like this:
- Good schools
- Spacious living areas
- A fenced backyard
In the city, other concerns might take precedence such as:
- Large bedrooms and additional personal space (especially if you have roommates)
- Amenities and reasonable HOA assessments
- Neighborhood walkability, e.g., proximity to work or public transit
Letting go of the perfect kitchen or an extra bedroom is easier once you've settled on the things you can't live without. Look at the list often to stay focused on your main priorities.
Expand your search area
Area growth is likely to keep pace with the market, which means that the outskirts of town might be hopping within five years. Consider stepping out of your ideal location by searching in the nearby cities. You may find better prices and more square footage.
Look beyond decor
Realtors and home stagers encourage sellers to decorate in neutrals and remove family photos for one reason: Buyers are bad at visualization. And it's not their fault: Half of the human brain is devoted to visual processing, and even something as simple as an area rug or good lighting can make or break a sale. When touring a house, try your best to look beyond the superficial:
- Easy fixes: Paint colors, baseboards, cabinet hardware and other minor upgrades are , and you shouldn't rule out every home that doesn't align exactly with your specific taste.
- What isn't staying: Home staging is powerful. 63% of realtors said buyers requested their homes look like homes staged on television, and 68% said buyers were disappointed by how homes appeared compared to TV shows. You can easily buy new furniture, but you can't easily . Look at the bones of the house to determine whether it fits your needs.
It's not enough to wait for your agent to email you with new listings; sometimes, you have to get creative. I found my Seattle home on Craigslist in 2012, just before the Zillow listing went live. When I couldn't reach my realtor, I called the seller's agent and appealed to him directly. "I have pregnant and I can't shop anymore. Please sell me this house!" After being outbid, we wrote a letter to the seller about why we couldn't a higher offer (we were expecting a baby) and why we were the right couple for the home. It worked: We got the house for only $27,000 over the asking price -- a miracle in Seattle -- even though there were other offers on the table., I'm
In another example, a friend wrote letters to every address in his favorite neighborhood, asking for first consideration if anyone was thinking about selling. One family was, and he bought their house in a private sale. The bottom line:is great, but it's not what motivates every seller. Consider the human factor and inject some personality into your offer.