Getting pre-approved for a mortgage loan and researching the housing market can make you a more competitive homebuyer. (Photo by Jessica Anderson)
Buying a home in 2017? To get ahead of the curve, try getting to know your local housing market.
The U.S. housing market is expected to cool a bit in 2017. But homebuyers will continue to see a high level of competition in many local real estate markets, largely due to high demand and limited inventory. If you're planning to buy a home, you'll want to have every advantage going for you when you enter the real estate marketplace. Here are five specific things you can do to make yourself a more competitive homebuyer in 2017.
1. Research your local housing market
Research is crucial when it comes to competing in an active real estate market. You want to move quickly when the right property comes along. To do that, you need to understand the dynamics of your local housing market.
Start with home prices. Take a look at the major property listing websites to see what homes have been selling for in the area where you want to buy. This will give you some insight into how far your dollar will go. You also want to figure out if you're in a sellers' market, a buyers' market or somewhere in between.
2. Get pre-approved for a loan before house hunting
If you're like most homebuyers and you need a mortgage loan to help finance your purchase, you should consider getting pre-approved for a loan. It will give you one more advantage in the local real estate marketplace.
In real estate terms, pre-approval is when a mortgage lender reviews your financial situation to determine how much they're willing to lend you. It's sort of like being pre-screened or vetted by a mortgage company.
There are advantages to being pre-approved. For one thing, it helps you narrow down the housing market to the kinds of homes you can afford. Pre-approval also makes you a more competitive homebuyer. Sellers will be more inclined to accept your offer if it comes with a pre-approval letter. It shows them you are serious about this purchase, and are capable of buying their home.
3. Narrow the market to improve your efficiency
Another reason to obtain mortgage pre-approval: By getting pre-approved for a certain loan amount, you'll be able to narrow the market to homes that fall within your price range. You'll avoid wasting time looking at houses that are too expensive. This is especially important in a competitive, fast-moving real estate market.
4. Make a strong offer based on comparable home sales
In a competitive real estate market, a weak offer could result in your dream home slipping through your fingers. So it's important to make your first offer a strong one. You might not get a second chance.
Before making an offer to buy a home, review similar homes that have sold in the same area recently. This is what real estate agents refer to as comparable home sales, or "comps." Comparable sales analysis is the first step to making a smart offer, the kind of offer that has a higher likelihood of being accepted.
5. Focus on the big homebuying picture
Inexperienced homebuyers sometimes get wrapped up in the emotional aspects of the buying process. They tend to take things more personally than a seasoned homebuyer or investor.
Buying a home is a business transaction. It's not personal. The seller is not out to get you. The seller simply wants to make the most money from the sale. And as a homebuyer, you want to get the house for a reasonable price. The idea is to find common ground so the deal can proceed.
If you negotiate the price to a reasonable amount based on comparable sales, it's time to seal the deal. Haggling back and forth over insignificant issues or small price differences could cost you the home. So keep the big picture in mind, and don't sweat the small stuff.
Know your real estate market. Have your financing lined up ahead of time. And move swiftly with a strong offer. These are the keys to success in a competitive real estate market.
About this Experts Contributor: Michael Shane is the CEO of Sammamish Mortgage and is a 15-year veteran of the mortgage industry. He has ranked as one of the top 200 producing loan officers in the country the past nine years.
As of January 22, 2017, this service provider was highly rated on Angie's List. Ratings are subject to change based on consumer feedback, so check Angie's List for the most up-to-date reviews. The views expressed by this author do not necessarily reflect those of Angie's List.