Buying in a hot house market is sometimes inevitable, but you can save money by avoiding these mistakes.
But don’t let the fear of tough competition send you into a panic. Avoid falling into one of these traps when shopping in a hot real estate market, and you’ll likely save yourself some money (and a few gray hairs).
1. Acting out of desperation
It’s hard not to be let down when attractive homes are taken from “new” to “pending” before you even have the chance to look at them, but remember: Desperation has no place in a home-buying transaction.
Once desperation sets in, you risk making an impulsive and otherwise unwise decision, such as talking yourself into a home that isn’t quite what you really want or paying more than you can afford. Even if you can’t or don’t want to make an offer, every home you research and visit will give you a better insight into the home-buying process and the market and allow you to refine exactly what amenities you want in your future house.
Once you know exactly what you want, let others know too. Give your contact information to the listing agents at open houses and ask them to drop you a note if they get similar listings.
2. Hesitating
What’s worse than seeing great properties come and go before you can get out to view them? Seeing them placed under contract before you make an offer.
Before you walk into an open house, make sure your paperwork is up to date and your loan approval hasn’t expired so you’re in position to make an offer that day. If you haven’t already gotten a loan approval, it’s time to start the loan approval process, stat.
3. Ignoring the market entirely
It’s nearly impossible to time the market and make your real estate decisions based on current trends. A better plan is to make your buying decisions based on what’s currently happening in your family, your career, and your life (and what you envision will happen in the next five to 10 years). That said, when it comes time to execute your decision to buy, it’s foolhardy not to pay attention to the market.
You need to be able to play both sides and avoid the panic-inducing fluctuations of the market while staying informed. Ask your real estate agent to help you pay attention to neighborhood-specific information, such as which types of properties move quickly, how many days they generally stay on the market, whether multiple offers are a reality you will face, and how much over asking price homes like the one you want are selling for.
Then use this information to make strategic decisions, covering everything from which properties and areas you’ll focus on to how quickly you’ll need to get out to see listings to — most importantly — what price range you should focus your search on.
4. Misunderstanding your budget
Don’t run the numbers in your head. Don’t ballpark your income, loan payments, and bills, stick your finger in the wind, and guess at how much you can spend on a home. Financially speaking, home buying is the big leagues, so you need to be sparkling, crystal clear on precisely what you can afford.
In a hot market, you may be faced with decisions about whether to increase your price range or your offer price on relatively short notice. If you need help, don’t hesitate to bring your tax adviser or financial planner into the home-budget discussion — especially if you’re a new homebuyer. They can help you understand tax breaks for new homeowners, which can free up some extra money for your mortgage, property taxes, insurance, and HOA dues or private mortgage insurance, if applicable.
Also, make sure you include line items for your savings, retirement investing, gifts, school tuition, travel, and recreation — the sort of things that lenders will not account for when they tell you what their guidelines say you can afford.
5. Overpaying
Hot markets mean multiple offers on the same home, which often result in a bidding war. And once you’ve had one too many homes pulled out from under you after a bidding war, it can be tempting to pay more than you budgeted for.
To avoid overpaying for a home just because it’s in a bidding war, be sure to go through comparable homes with your agent before you even look at the house.