How to Successfully Navigate the Housing Market Right Now
/I’m sure you’ve been hearing about the crazy housing market for awhile now. Homes that are priced right and in good locations are selling very quickly. It’s a great time to be a seller (if you have a place to move to), and a tough time to be a buyer. I thought it might be helpful for you to read what I’ve been seeing on the front line.
If you want to buy in an area of Maryland that is close to DC, such as Silver Spring, Kensington, Chevy Chase, or Bethesda, you need to be ready to compete. That means a strong pre-approval letter from a local lender, preferably for a conventional loan, or be ready to pay cash. It means you need to make your offer with as few contingencies as possible, and be ready to close quickly and offer the seller a rentback. If you’re a first-time buyer or haven’t bought in some time, let me break down what I mean by those statements.
Using a local lender is important, because the seller and listing agent want to be confident that the deal will close quickly, and on time. Local lenders can usually close much more quickly than national banks or internet lenders. They also usually use appraisers who are local and familiar with this market, so the home is more likely to appraise (meaning the value of the home will be at or above what the buyer is under contract to pay for it). If you work with me, I can provide you with a list of great local lenders that I trust to do a good job.
Contingencies are clauses in the contract that let the buyer cancel the deal without losing their earnest money. In a competitive market, you want to have as few contingencies as possible. In this market many offers even have zero contingencies. That means if you want to do a home inspection (which I strongly recommend), you need to do it before the seller accepts your offer. That’s called a pre-inspection. It means that you work with a lender who can take your application all the way through underwriting ahead of time, so that you’re fully approved for a loan and don’t need a financing contingency. It might even mean that you save enough cash to be able to waive the appraisal contingency. That way if the home doesn’t appraise to what you said you would pay for it, you can make up the difference in cash, because the lender will only loan you what the appraisal says the home is worth.
Finally, many sellers in this market want the flexibility to sell their home, collect their money, and then buy a new home. So, if you’re renting or in a flexible situation, it helps to settle on the home you want two or three weeks after you put a contract on it, but then agree to let the seller stay in the home, and rent it back from you, for 30 – 60 days. Often, to compete, they don’t even rent it back from you, you just agree to let them stay there for free for 30 – 60 days. 60 days is usually the limit a lender will let you do this, but if you pay cash for a home, you could offer that the rentback last even longer.
Does all of this sound intimidating? I understand that it might, but if you work with a good agent they will be able to help you through all of these steps, and hopefully take some of the anxiety out of the process for you. The result is hopefully a home you’ll love and be happy in for many years to come. If you’re interested in working with me, or just have questions for me about this process, please feel free to contact me.