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Tips For Navigating A Hot Real Estate Market

As more people rush to snap up homes and take advantage of super low mortgage rates, inventory is shrinking and homebuyers are compromising on their dream-home expectations.

Weighing heavily on most homebuyers’ minds right now is how high comparables can climb and how long they’ll be priced out of the party. They wonder if this is a bubble that has the potential to burst and bring the whole masquerade to an alarming close. Real estate commentators like Zillow, Redfin, and Realtor issue weekly accounts on the number of home closings, sales averages, and which areas are the most feverish. As a by-product, never has there been a time in American history where homebuyers and sellers have had more information on when to sell, where to buy, and whether to move.

Despite this insightful data, there has never been a period in this country when Americans have been more eager to plunk down their hard earned savings more complacently on houses sight unseen.

Purchasing a home can be one the most satisfying life changing aspects of the American Dream. It’s also, for most people, one of life’s most costly and time-consuming purchases that leaves very little wiggle room for financial missteps….unless you’re so wealthy that it doesn’t matter how much money you can squander.

We’re not saying that anyone should pause. You might be in a situation where you need to buy and later in this article we will give you the tools on how to navigate home buying in this stormy climate.

You Can Search For Hilton Head Homes For Sale Right Here

But first let’s examine this market a little deeper and see what tactics can be a benefit to you in your current situation.

Don’t Overpay

This seems obvious, but it’s certainly more tricky than it looks on the surface. Prices are overheated to the tune of 16% to 20%. But that doesn’t inevitably mean that house prices are going to plummet or even come down at all. What they’re not going to do, most real estate experts concur, is to keep appreciating at their present rate. This means anyone coming to the party now is coming in at its highest arc and thus will have less room for making money over the long haul.

If you think of your home as an investment (especially in light of no capital gains tax after two years) and not just a place to live, then the cheap money now might be the way to go if you adore the house and can realistically afford to buy it. However, tying up your money might not be wise in the long run, especially on an investment that isn’t appreciating how you’d like.

Don’t Settle

With so few homes available on the market and prices continuing to skyrocket, it shouldn’t be a surprise that many homebuyers are settling for living in neighborhoods they never wanted to live in, or stretching themselves to the limit to buy lesser houses for more money, or making financial decisions that do not complement their values.

Homes in the best possible situations are (or become) reflections of ourselves, where and how we want to live, and the neighborhoods we want to raise our children in. When the pandemic began, people began buying homes quicker and in more unfamiliar places with less particulars than ever before. This means millions of homebuyers already have bought properties they never had time to assess before upending their lives and moving.

So if you don’t have to buy or feel you’re settling, then a short pause might be welcome. In a few months, you’ll probably have more house buying options, at probably more logical prices, and be under less duress.

Don’t Tie Up Your Money

Remember the NINA loan? How did “No Income No Assets” (and in many cases 100% financing) make sense? It should have looked like a train wreck if anyone was watching. But that was the market place before the crash of 2008. For purchasers, investors, and speculators, however, it was free money with nominal risk and no skin in the deal.

This time, the real estate topography has been flipped. Buyers around the country have been asked to put up to 40% to 50%, which for most first time homebuyers can eradicate most, if not all, of their savings. This leaves no emergency funds for maintenance, unexpected repairs, or tax increases. 

In some markets, buyers who can’t contend with “all cash and no contingencies” don’t even get asked to the table.

Stock market indices have been setting all time highs for years, even throughout two presidential administrations. Private equity firms and hedge funds have been posting 25% returns for decades. If the down payment leaves you with no savings it might be wise for a while to try and accumulate more money until the market cools a little.

Don’t Feed the Animals

How many times have you seen the sign, “please don’t feed the animals,” while visiting a zoo? Well the same thing can be said for markets, but with a little more specificity: “Don’t Feed the Bull.” Markets do not ratchet up on their own. People, including investors, make them that way (think Gamestop). The longer people crave over something they think they have to have, the more fortified, and often illogical, bull markets become.

Real Estate is no different, except that it is an investment in which we actually reside. At the present time there are inventory issues in many parts of the country. Housing prices continue to rise, in part, because more people want to buy right now than there are properties currently listed for sale. Yet that’s not the total story. At some juncture last year, raw emotion took over.

Millions and millions of people wanted more space, less population compactness, and greater security at the same time. And they were willing to pay any price to get what they wanted.

It’s not exactly clear if the red hot home appreciation was strictly a supply and demand issue or roller coasting emotions that may take some time to shake out. But one thing is sure, the only way to curb a bull and bring prices down is to resist feeding the bull. That’s why if you want to purchase, you need to do so in a rational, logical way.

Don’t Panic

This is probably the most important, but also the hardest not to do. Just as markets don’t collapse and stay down forever, nor do they stay high forever. Time and patience will always counterbalance volatility.

Nearly 1 in 4 American homebuyers experienced buyer’s remorse after closing on their new home, according to a 2020 Flyhomes survey . Yet, you can’t simply return to a house like you would a new pair of jeans that don’t fit. 

So if you are homeshopping here are some tools to use to avoid buyer’s remorse. 

1. Don’t Rush It

Rushing to buy a new home is never a good idea. If you’ve just moved to a new city and are anxious to put down roots, consider corporate housing or some other short-term living arrangement so you’ll have plenty of time to find the right home. Decide how long you want your commute to be and create a radius in which to house hunt. Get to know the neighborhoods and schools within that radius.

If you’re buying in an area of the country with a red hot housing market and feel pressured to get into a bidding war, you have even more reason to get to know an area before fighting for a home.

2. Conduct a Self-Assessment

Before you begin hunting, consider the life you and your family want to live. You’re going to lay out a large amount of money to pay for your home, so make sure the investment fits you and your family’s lifestyle. If you want to walk to your favorite restaurants or be near concert venues and museums, you probably want to buy in the city. If you crave quiet and sitting around a patio fireplace, suburban life may be a better fit. Want to have chickens in the yard? The point is, you want your new home to fit you and your family. Trying to mold yourself into someone you’re not by moving to the wrong part of town is a sure way to regret your purchase.

3. Focus On the Details

If you’re shopping online, try to do it when you have quiet time. Once you come across a home that strikes your fancy, note how long it’s been on the market, when it last sold (and for how much), how much real property taxes are, and how much the houses around it are worth. and are among the many websites that offer this information. Some facts like property taxes and how much a home last sold for are reliable. Property values are a guesstimate, meaning you’ll need to lean on your real estate agent to verify the information.

4. Get Pre-Approved

Before you step into any open house, take some time to call a bank or credit union and ask for a pre-approval. During the process the lender pulls your credit, reviews your income and debt, and looks at your cash balance. Based on that information, the lender will tell you how much you can borrow and what your monthly payment might look like. Use this information to guide your budget and later show sellers the pre-approval letter so they know that you’re serious about your offer.

5. Create a Budget

Overspending can lead to buyer’s remorse, so get familiar with all the expenses that come with homeownership. To make a realistic budget, you can:

  • Ask the bank to estimate your monthly mortgage payment, which should include property taxes and may include private mortgage insurance.
  • Ask about monthly fees, if you’re buying a home or condo under a homeowners association.
  • Estimate home repairs and maintenance. Plan to spend around 1% to 3% of the home’s purchase each year on these expenses

Here’s a good rule of thumb to use:

These costs combined should equal no more than 30% of your monthly income.

6. Forget the Competition

We’re in a competitive seller’s market, which means you might be asked to exceed the list price to secure the home. 

So if you’re pre-approved for $400,000, for example, then you might want to look at homes priced around $375,000. That gives you some room to offer more than the listing price. But do not get caught up in a bidding war. It’s important to take a step back and determine if it’s really the right home for you. It can be easy to get carried away and up your offer, but make sure you determine what the home is really worth to you. Ending up in a house that you overspent for and are not thrilled about will inevitably cause remorse.

7. Don’t Skip the Inspection

In the current housing boom, homebuyers are scrambling to do whatever they can to get their offers accepted. One way to sweeten an offer is to skip the home inspection because it removes a hurdle in the closing process. But when homebuyers decide to forgo a home inspection, it puts them at risk of purchasing a home with underlying issues. Here are some reasons you should never skip a home inspection:

  • You May Need to Foot Expensive Repairs. A home inspection is your last chance to uncover potential damage in a home before you buy it, which is why so many homeowners get one. During the inspection a certified professional will look through every nook and cranny of the home (inside and out) to check the home’s condition and help you understand what you are getting into. Going without an inspection can cost a fortune later if you find the house needs extensive work. The main risk is hidden defects (or even visible ones) that an inspector could find but a layperson could not.
  • The Home May Be Hazardous. Inspectors also check for hazardous conditions such as lead paint, unsafe heating equipment, bad wiring, or structural issues. These are all things that you might not notice when you walk through the property. That means forfeiting the inspection may put your family’s health and safety at risk, plus additional costs to remedy the problem (see above).
  • It May Affect Your Homeowners Insurance. The standard home insurance policy does not cover wear and tear type damage that existed prior to ownership and thus may cause coverage issues. Also, some insurance carriers will conduct an inspection after closing, and if a buyer waives an inspection, he might end up paying for repairs uncovered by the insurance company.

8. Visit the Neighborhood

Knowing your neighborhood inside and out will help you see if it’s a good fit. Drive throughout the area during the day and at night, during the week and over the weekend. Pull crime statistics, talk to neighbors, and check home price trends. Check out the amenities, including public transit, parks, stores, restaurants, hospitals, day care options, and gyms. Listen to your gut; if you have major reservations about an area, consider moving your search to another neighborhood.

9. Think About Your Future Plans

Don’t sacrifice the long term requirement for the short term gain.

When home shopping, ask these questions:

  • What’s important to me and my family?
  • How long do I want to own the home?
  • Are my family dynamics changing anytime soon?
  • How long do I plan to live in this area?
  • What is my maximum budget?

Buying a new home can seem overwhelming, especially while the market is hot. That’s why it is important to take your time and consider all the options and outcomes before making a final call. Working with a real estate agent can help ease the burden. Be clear about your budget and go into the process knowing your must-haves and the things you are willing to concede on.

Keep in mind: buyer’s remorse is normal even if you do all the above. The good news is that if you did all those things it usually passes when you focus on making the house your home.

Contact Amy Aurelio To Find Your Perfect Hilton Head Home

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