Six Mistakes Buyers Can Avoid

by Laura Agadoni for Trulia.com*
 

If you’re looking for a home when the market favors sellers, as it does now...
you need to know some tricks of the trade to help ensure you don’t make any mistakes. Buyers in a sellers' market can get what they want, but they need to bring their “A” game. 

Buying a house in a hot market isn't for the indecisive. Here are six mistakes buyers commonly make, mistakes that you can learn to avoid when shopping in a sellers' market.
 

1. Not making your best offer

The drive to buy what we want for as little money as possible is practically in our DNA. So when most people see the listing price of a home, they naturally wonder what they can really get the house for. Offering lower than asking price is a perfectly reasonable strategy if the house is overpriced compared with other similar homes in the area, or if it’s a buyers' market with lots of available inventory. But trying to get a deal when you’re in a sellers' market may have little chance of success. “In a sellers' market, there is by definition a shortage of inventory and the competition is often fierce,” says David Dubin, an experienced broker. I always encourage buyers to come in with a strong opening offer.”

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2. Waiting too long to make an offer

Just as impulse-buying a home is risky, analyzing a home purchase to death in a sellers' market is inadvisable too. When you wait too long, you're at high risk of losing [the home] you have fallen in love with. Once you’ve determined the type of home you want, the location you desire and your price range, and finally find a home that meets your qualifications, make an offer. To give yourself more leverage, be prepared to make a quick offer by having your finances in order — come with a letter of preapproval. “Know how much you can truly afford, repair any credit issues, have your down payment in hand, and delay [other] major purchases,” says John Lazenby, president of a regional assocation of real estate brokers.
 

3. Not working with a competent agent

In a sellers' market, it benefits buyers to get all the help they can. In the State of Washington, brokers are by definition engaged in the limited practice of law. It's their responsibility to secure and protect your interests, to assure that there'll be no trouble downstream. In most cases, buyers don’t pay real estate agents; sellers do. When you're competing against other buyers in a sellers' market, it's vital to be "offer-ready." Working with a real estate professional saves tons of time and stress, as they know the ins and outs of the process and can provide tremendous insight regarding upcoming inventory.
 

4. Not being prequalified (or better yet, preapproved) for a loan

You might know that you’ll be approved for a mortgage loan based on your steady income, your low debt-to-income ratio, and your high credit score — but the seller probably doesn’t know that. The only way to prove to the seller that you’re a qualified buyer is to be prequalified by a lender. Prequalification is absolutely paramount. A buyer has zero advantage over other offerors if they haven’t taken the time to speak with a lender and don't have the cash to purchase without a mortgage. Not getting prequalified sends a message to the seller that the buyer isn’t taking their house hunting seriously.
 

Preapproval is a step above prequalification (where you simply tell your lender your financial story). The preapproval process involves submitting a mortgage application and supplying verifying documents. Preapproval by a reputable lender is key. Presenting this shows the seller that the buyer has already set the wheels in motion and is serious about making [the deal] a reality.
 

5. Not being prepared for competition

If there is ever a time when a bidding war could be imminent, it’s during a sellers' market. This is stressful and no buyer wants to be involved in such a battle for fear of possibly going over budget. But broker Michael Holt presents this solution for buyers: “Set your search below your max budget to leave room in case of an over-asking bidding war.” Remember that in a market in which real estate purchase prices are rising, your small overpayment will be quickly overtaken by a higher value.
 

6. Not learning from your mistakes

There’s no shame in learning that your offer has been declined, but it’s easy to get frustrated if your offers are repeatedly declined. Learn from your last transaction(s) so you can get what you want. Buying a house, particularly for first-time buyers, is a lot like dating. “You probably have to let a few keepers slip through your fingers, have a couple sleepless nights over it, and then come back with serious intent to lock up the next greatest opportunity in front of you.”

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*Republished by permission of the author

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