As our very, very short winter seems to be coming to a premature end, the real estate market is continuing to warm up – especially here on the westside in L.A. Decent homes – by that I mean places that are livable without needing a major facelift – are in high demand and short supply. So as an agent who works on both sides of the fence, here are my recommendations for buyers today:
- Put your best foot forward in writing your offer. If you can write an all-cash offer, do it. Cash is king, and a seller will readily choose cash over financing. If you can stretch yourself to manage it, even if you immediately refi the house once it’s purchased to pull money back out, being able to buy with an ALL CASH offer is your best bet for being top of the sellers’ list of offers.
- Make your terms as reasonable as possible. If you are going to be needing a loan to make the purchase possible, consider other ways to make your offer as appealing as possible. I recommend making the inspection period as short as possible: 7-10 days instead of 14-17. See if you can get all your loan ducks in a row so that you are fully approved and ready to go – a fully approved loan will give sellers less heartburn and more confidence that you can close the deal.
- Consider removing the appraisal contingency. If you are going to need a loan and an appraisal, consider if you would be able to come up with cash to bridge the gap between what a lender might appraise a house for and what the seller is asking. If you can remove the appraisal contingency because you have enough cash on hand, it can be very encouraging to seller for you to remove it. In our rapidly appreciating SoCal market, it is often difficult to get comps (comparable sales) to keep up with the quickly increasing prices. As a result, conservative lenders frequently appraise lower than market value leaving a gap between the contract price and the loan amount. If this were a buyers’ market, sellers would have no choice but to lower their price to match the appraisal, however if the house is everything you have been looking for, and you are planning on holding the house for at least 3-5 years, then a gap between the bank appraisal and the purchase price may not really matter. Your home will continue to appreciate, and the appraisal will be long forgotten.
- Make sure your credit is squeaky clean. Spend a little time getting your credit to look as good as possible BEFORE applying for a home loan. Pay down credit card balances as much as possible, and check all three of your bureau scores to see if there are any errors or if there has been any identity theft – which is a massive problem right now and not getting better any time soon.
- If you are self-employed and tend to show a lower income for tax purposes by having a ton of write-offs for your business, be prepared to have more cash reserves on hand or a co-signer with a full-time steady paycheck or other assets to help give the lender confidence in your ability to handle loan repayment.
- If you are going to be needing financing, don’t write a ridiculously low offer. Sellers are already taking a gamble that you can close the deal with your loan, and a low price will just not cut it in this market. Be realistic about what the house is worth – insulting the sellers will not be a persuasive way to get your offer accepted. In fact, if you are financing in a seller’s market, I usually recommend coming in at full-asking price (unless the price is way inflated), or even consider slightly above asking to entice the seller to choose your offer over someone else’s offer.
Looking to buy soon? Contact me and I will walk you through every step of the process. I have an excellent team including highly experienced lenders, who can smooth out the lending process.