How do I Become the Winning Offer when Buying a House?
Buying a home in Massachusetts inside of Route 495 (and outside) has become a competitive blood sport. Even more if the veins and arteries of Boston’s commuter rail, rapid transit (the “T”), or main highway routes stretch into your destination city or town.
As competitive and resourceful as you may be, this is an area of practice you cannot simply walk in and become the winner.
There are a few areas that you’ll need to navigate. Let’s divide them into Mindset and Tactics.
Today’s article is about Mindset.
Locate the Exit
Always have a plan for how to bail out. If you give your landlord notice that you’ll be out by the end of the month that may leave you with no back up plan. There are certainly many reasons why you would decide mid-process that you do NOT want to own this new home. If you can’t backup and have reached the point-of-no-return you become trapped and suffer the pressure of making an irreversible mistake.
You’d much rather forfeit an extra months rent (that allows you to move in/out on a mid-month day, have time to refinish floors and accept appliance, carpet delivery/install, and clean the outbound home) than being forced to close on a home that you have just found out abuts the parents of someone being paroled for an unmentionable crime.
Know When to Fold ‘Em
On-the-spot inflation occurs when two or more parties cannot control their own emotions or desires to own a home. In order to win, you must also be able to Fold. This means stop bidding at a predetermined amount that you agree to hold steadfast to. When bidding over the Asking Price “spot inflation” occurs. Spot inflation is almost always a loss of equity.
For a Cash Buyer, you’re essentially filling a tank that has a hole in it.
For a mortgage applicant an overbid house is a problem itself. The “Lending Value” (the amount that the mortgage is based upon) is the LESSER of the final agreed purchase price OR the Appraised Value. Appraisals for mortgages are historical and mathematical. They are not designed to capture future appreciation, ”potential” or growth. After adjusting amenities using uniform industry formulas, an appraisal really is an average value of 5 very similar recently sold homes. If that “Static” appraised value is lower than your purchase price, you loan amount may be chopped, or if the loan stays the same you’ll be bumped UP into higher leverage tier. Higher Leverage Tier will result in an added cost-of-borrowed-money. (google: Loan Level Price Adjustments). It could also trigger the need for Private Mortgage Insurance (PMI) where no PMI was thought to be needed when you entered the race.
Know What You Want
Zero in on attributes that are non-negotiable (bedroom count, commuting windshield time, garage, outdoor space, in-law needs, storage, etc.). A buyer looking in 10 towns for a house, condo OR multifamily will be looking frantically and running ragged. A buyer looking for a 3 bedroom cape with garage in a specific school district will be laser focused. Narrow it down. Avoid distractions. Then and only then can you get resourceful.
Study Your Environment & Be Bill Belichick
Subscribe to the local paper. Visit City Hall. Read the zoning and pending changes. Set Google Alert’s for the town, neighborhood (and even streets). List out every street that interests you. Crawl Google Earth. Drive each street. Learn the patterns of the traffic, noise and other influences. There’s a wooded winding street in Beverly that’s littered with hub caps and shards of headlight plastic. Makes no sense, right? Except that 1,200 out of region college students are led down this street for the first time every September by Google Maps when the start their classes at Endicott College.
Once you know where you want to be, enlist some help from your network. I don’t know anyone who wants to sell a home in Beverly Cove right now but I do know 25 people living there and I’d be surprise if one of those folks doesn’t hold some intel. Enliven your friends, coworkers and social network. Let them know your plans. You’d be surprised who steps forward to help or with a suggestion.
Avoid Rush Hour
If you’re watching only MLS you’ll be showing up to the same party as many other people with similar goals and arrive to a metaphorical real estate traffic jam. The majority of buyers are too busy to head into their destination area and immerse themselves in the neighborhood they’ve selected. Arm yourself with a coffee and then go walk the neighborhood. Be friendly, accept a wave, don’t be reading on your phone. Bring a dog (and bags), borrow a nephew, find a bench, coffee shop and see what happens. Every neighborhood has a center. In Topsfield for instance there’s a public bulletin board in what seems like the back room of the Essex County Co-Op. Post a note. Who knows! …. you may be solving a problem for a future seller who is fretting about privacy of having to do a public open house, or needing to select which realtor friend they hire (and which realtor friend they lose) and you just gave them an out: “I met a buyer directly and they offered me market price, so I sold it without needing a realtor!” Your note solved a problem for a future home seller. Can you think of other ways you could solve a problem for a home seller? I can. 10 of them.
Get creative. It works because very few other people are doing it. I’ll look forward to regrouping with you soon on “Tactics For Buying a Home in a Competitive Market”