Welcome to the world of real estate. It seems everywhere you turn this year, it’s a topic of conversation. Everyone knows a family member, friend, or neighbor who has either lost out on multiple houses in a bidding war or received an offer far over list price. This season has brought my clients both excitement and frustration resulting in both happy and sad tears, and along the way, I’ve learned patience and keeping a level head in what seems like utter chaos will win every time.
Following are questions that, over my 10 years of real estate experience, have repeatedly come up. I hope that you find the answers valuable and may answer some questions you may have been afraid to ask.
Is a pre-approval REALLY that important?
YES, YES unequivocally YES. We require a pre-approval or the ability to supply proof of cash funds prior to scheduling showings. I hate to be blunt but looking at houses without either is a waste of everyone’s time, yours, the sellers, and agents alike. Clients spend months and months searching for homes to buy online and quite often as soon as they find the ONE they want to see, they find out they are not qualified to buy the house.
Your ability to afford a certain housing payment does not necessarily translate into loan qualification, there are many other factors involved. Not only are clients dreams crushed in these scenarios but the seller has also taken a leap of faith that you may be the one and has cleaned the house, made arrangements for them, kids, and furry friends to be out of the house (often at times that aren’t easy for them to do so) and the agents involved have many times re-arranged their schedule to accommodate a showing.
In addition, in a competitive sellers’ market, there is often not time to view a home and then contact your lender for a pre-approval as there may already be offers on the table waiting to be presented. Pre-approval letters or proof of cash funds should be part of the initial offer for an even playing field with financing.
My lease is up next May, should we start looking now?
Although it sounds like fun to go look at houses, in the event you may have a longer lease term expiration we ask that you use this time to tour open houses in the areas you have an interest in to discover your likes and dislikes. We also suggest at this time to review your lease or have a conversation with your landlord about your liability if you were to break it early. Some rental agreements will allow you to sublet your place should you find your perfect home earlier than anticipated, some will require rent paid until re-leased, and some may not allow you to move out at all over winter. There is not a one-size-fits-all in the rental world.
The general rule of thumb is that once you find your home and receive an accepted offer it takes somewhere between 30-45 days to obtain your financing and close. Depending on the seller’s situation, they may stretch that out to 60 days but that may interfere with the seller’s next move so plan on 30-45. If it takes that long to close – work backward. Looking somewhere between 60-90 days from when your lease is up would be your ideal timing even if you must overlap a month or so with rent. Your loan officer will explain to you that your mortgage interest is paid in arrears so technically you “skip” your first month’s mortgage payment, this may help you with rent overlap a bit. If you don’t mind a lot of overlap, perhaps 120 days. It is better to know you have a home you want to live in vs. force a purchase on something you don’t love just to avoid signing another lease.
We hear that houses are going for 30k over asking price so why even bother looking and writing an offer when we can’t afford to do that?
Yes, in some cases that is true. But in our 10 years of experience, we can assure you that it is not always price that “wins.” In fact, in multiple situations, our clients have gotten their house by NOT being the highest offer! Agents will have different philosophies on this but in our experience, actual terms of an offer can make all the difference. Simple ideas like finding out when the seller’s preferred closing date or structuring a contingency to be a little more flexible but still protect you as a buyer can make your offer stand out from the competition.
We take a very common-sense approach that in real estate, as in life, what is meant to be is and competing against anyone other than yourself to offer the best terms that YOU possibly can end up in heartache. Again, patience during the process is key. You absolutely have the right to be disappointed if you lose out on what you believed was your dream home, but we have a list of clients that will happily tell you that although beyond frustrating, being told they were the bridesmaid and never the bride, they ended up in the house they were meant to be in.
There is nothing worse in our industry (and it happens, it is the dark side that does not get reported) when a buyer has remorse after “winning” against multiple offers because they far exceeded what they were willing to compromise and once the excitement of the win wears off the aha moment of “what did I just do?” appears and a buyer will try to terminate the contract, often at a financial loss. We want to avoid that for you and feel that our approach, in the long run, will benefit you for years to come.
We would love to continue the conversation with buyers who are thinking of new housing options within real estate. Industry insiders predict, given the continued lack of inventory and low interest rates, this market may extend for the foreseeable future. Please reach out with questions of your own and visit www.denaligroupwi.com to start your search!