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If you're trying to buy a home in 2020, chances are you've hit a few roadblocks. Buying a home can be stressful in any market, but with the coronavirus pandemic quarantining most buyers and sellers, the process may be more challenging than usual.
But while the real estate market has changed (notice we said changed, not stopped), the business of buying and selling has adapted to meet consumers' needs. If you've decided now is the time to buy a home, we've got three tips to help you prepare to buy a home in a time of economic uncertainty.
1. Your Buyer's Agent Is Your Best Friend
Since your home is probably the most expensive purchase you will ever make, it is essential to enlist the help of an expert to handle the complexities of buying a home. Enter the buyer's agent. True to their title, buyer's agents are real estate professionals who represent the buyer and their interests in real estate transactions. By signing a contract with a buyer's agent, you can ensure that your interests are protected. The best part is that, as a buyer, you don't have to worry about the expense of hiring an agent because the seller pays the commission for both the seller's and buyer's agents.
The goal of a high-quality buyer's agent is to make sure that their clients end up happy with the home they purchased, as well as the price they paid for it. Choose an agent who has several years of experience and a proven track record of helping individuals buy and sell homes in the area in which you wish to live. They will provide you with the inside scoop on school districts, commuter options and crime rates.
Most importantly, a buyer's agent will help you narrow down what type of property you are looking, for as well as what you can afford. They will then show you homes that match these criteria. You may know the number of bedrooms you want and whether you need a garage, but an agent keeps an eye out for warning signs of issues like mold, ventilation problems and leaks.
Essentially, the agent is your advocate and resource for anything related to your home purchase. Leveraging their negotiating experience takes the pressure off you and can keep you from paying more for a property than it is worth. When you are ready to purchase a home, your agent will help you determine the amount of the offer, considering how long the property has been on the market and comparable property sales in the area. They will write up the contract and present it to the seller's agent and will handle any further negotiations.
Buyer's agents can use their professional network for your benefit. The right agent can refer you to reliable home inspectors, mortgage brokers, movers, home improvement specialists and real estate attorneys who will offer high-quality services at reasonable rates. If you experience setbacks -- for example, an issue with the home inspection, your agent acts as a liaison between you and the seller to resolve the issue. Professional agents are comfortable with these types of conversations and can work with the seller to negotiate improvements you expect to be made before finalizing the transaction.
Your agent will be familiar with the endless paperwork that must be completed to purchase a home. A mistake or omission in a document could cost you a substantial amount of money. They will help you to complete all the documentation correctly. If you have questions or concerns about the details, you can rely on them to get you the information you need to help you feel confident in your purchase. A buyer's agent takes the fear out of signing on the dotted line.
2. Get Comfortable Waiting
The pandemic has caused industries of all kinds to invent new methods of conducting business. The real estate business is no exception. With social distance guidelines in place, realtors have adapted quickly, offering creative options for viewing homes, including virtual tours and video walkthroughs. Title companies are offering drive-through or curbside closings, as well as remote online notarization. But even with all these efforts to "adapt and overcome," the efficiency of the home-buying process has hit the brakes hard.
You still need an appraisal to secure your home loan, and although some areas are allowing desktop and external-only appraisals, most appraisers need to visit properties in person to complete their work[MOU1] , as do home inspectors. Naturally, they want to be sure they are well-protected before they enter a home. Several states have left appraisers and inspectors off the list of workers deemed "essential," causing the housing market to slow to a crawl. In areas where inspections and appraisals continue, the high demand for services is further delaying the process
Home closings are taking longer from the time an offer is accepted. Why is it taking so long? Lenders are overwhelmed with refinancing applications due to historically low mortgage interest rates. Many lenders are enjoying record months in closings, which typically causes delays in the number of days to closing. Underwriters are deeply backlogged, and their turnaround time has increased.
Another complication is dealing with the closure of local government offices. Many municipalities do not have remote work options in place, and due to social distancing guidelines, have closed or limited staff. At the county level, if the recorder's office is shut down, title companies cannot research a property to be sure that it is clear of liens. If the home you want to buy does have outstanding claims, it may take longer to clear them up if the lien holder's office is closed or if they have sold the debt.
In short, closing on a house may take longer now, but it can still happen. Talk with your agent about real estate procedures in your area and rely on their expertise to help you get through the process as painlessly as possible.
3. Expect Competition
Low mortgage rates have caused real estate in many cities to sell nearly as quickly as it did before the pandemic quarantined most Americans. These low rates allow home buyers to pay more for a home and keep their monthly payments manageable.
More than 90% of homes continue to sell quickly at the asking price or above. According to Redfin, more than 41% of homes faced a bidding war in the four weeks ending May 10. That's up from just 9% in January before the pandemic hit the U.S.
If you are seriously interested in a property, make an offer, and be available to discuss counteroffers. Have your inspector lined up ahead of time to speed the process. Many inspectors are now allowing buyers to view the inspection remotely to accommodate social distancing guidelines
Be prepared to make more than one offer on a property and know that you may be just one of multiple offers. This is especially true in more urban areas and among moderately priced homes. Because you may have to increase your offer, try not to look at houses at the top of your price range. Your agent can help you determine your maximum budget. Ask to look at homes priced below your limit.
Bottom line? Inventory is low, and demand is high. Buyers have been locked up in their homes for three months and are realizing they might be staying home for longer than initially anticipated. They are evaluating their need for indoor and outdoor space, as well as home offices. If they are unsatisfied with their current space, they hire an agent.
Ready to Start Your Home Buying Journey?
If you are ready to start your home buying journey, the first step is to secure financing. Start with a pre-approval letter. A pre-approval letter indicates that the lender has checked your credit and verified the documentation to approve a specific home loan amount (the approval usually lasts for a particular period, such as 60 to 90 days). The lender will determine the amount you may borrow depending on your credit score, income, existing debt (student loans, car expenses, credit card payments), and obtaining verifying documentation. Find out more about the pre-approval process today.
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