The 2021 real estate market was intense for home buyers, and 2022 is expected to be no different, as supply still can’t quite meet the demand of buyers at the moment. Supply chains have affected every area of the real estate industry, whether you were planning on buying a new build, a turn-key, or were expecting to flip a home. Across the U.S. the median price of homes has gone up 16%, with Denver feeling those effects strongly as our home prices have gone up ~15% or more. The Denver market has been one of the most competitive in the nation for several years. Last year, it was not uncommon to see cash offers, escalation clauses, waived inspection objections, waived or shorter loan objection deadlines, 10-20 day closings, free rent back, or flexible closing dates to fit the seller’s situation. Additionally, most offers are being accepted within the first two weeks of the home being on the market, a process that previously took much longer. While all of this information might turn some off from buying a home, if you’re interested in purchasing a home in 2022 these tips will help you navigate these competitive circumstances to secure your dream home.
Work With a Trusted REALTOR®
During this competitive market, you want to make sure that you and your REALTOR® are on the same page. Sit down with potential agents before agreeing to work with them and explain your needs and wants for your house to them. Then they should explain to you the state of the market, how realistic your must-haves are, and their expectations of you as their client. While experience is always a plus, try to find an agent who understands exactly what you’re looking for. Consider this relationship as a partnership; with you working together in order to find your dream home for your dream price point. Demonstrate flexibility, as you have to be willing to work in this market to secure your forever home. This might mean taking a risk you wouldn’t normally take, like putting in an offer right away, but trust that your REALTOR® has your best interest in mind.
Working with a trusted REALTOR® is a good rule of thumb whenever buying a home, and even more so in tight markets such as Denver’s. It makes it even more critical for the buyer and their agent to have open communication about their options, what competitive terms may mean for the buyer, whether the buyer is realistically comfortable with them, and how things could go wrong. A trusted REALTOR® should be as prepared as possible, as they have the most experience in the space, especially when trying to find the most ideal home for their clients. While experienced buyers may have more familiarity to risk-tolerant and creative thinking, it’s still best practice to work with a professional agent.
Know What You Can Afford
One of the best ways you can be prepared in this market is by knowing exactly what you can afford. An accurate and reliable way to do that is to get your mortgage pre-approved. Mortgage pre-approval is the process of determining how much money you can borrow to buy a home. This process involves looking at your income, assets, and credit score while determining what loans you are eligible for, how much you can borrow, and what your interest rate might be. This process will help you make strong offers, especially in the most competitive of markets. Pre-approvals can last from about 60-90 days, which should cover the time you spend looking for a home and into the offer approval process.
One strategy for home buying is to look at homes under your threshold and within your mortgage pre-approval. Currently, homes are getting locked in bidding wars, raising the prices well beyond the sticker price. Searching for homes under your threshold leaves room for you to bid and make several offers without going over your pre-approved loan.
Be aware of any other costs associated with closing your home, such as a down payment, closing costs, or lawyer fees. These costs are all associated with owning your dream home. It’s essential to factor them into your overall costs as they can sometimes take buyers by surprise.
Don’t Fall in Love with Just One House
In this stage of the home buying process, try not to fall in love with just one house, just in case your offer isn’t accepted for whatever reason. While it’s important to be able to envision yourself and your family living there, avoid getting too attached. Keep in mind whether or not the home would function well within your family’s needs. However, avoid idealizing prematurely on what you think you would change when you move in. Consider location, added amenities and room assignment designation if you have a family or plan on growing your family. You may love the design of some houses, but the truth is not every house will be a home for you.
In this market, you may make several offers that don’t get accepted before you land one that does. Tides are turning over quickly and some buyers are being overly aggressive. Stay calm through these situations and know that at the end of this process you’ll have the home you have always wanted. Tour several houses that could all be good options for your family and keep track of them carefully. Make your offers quickly, and work with your agent to make sure you are getting into homes as quickly as possible after they go on the market.
Be Kind to Yourself
The past year has been difficult for homebuyers, for many reasons, a few of them being millennials entering the housing market, supply issues brought on by the coronavirus at national and local levels, and people moving out of cities and into less populated suburbs. This ultra-competitive market sets up an unhealthy marketplace for buyers’ remorse, communication challenges, misaligned expectations, and even issues after closing. Remember, when embarking on your home buying journey to be kind to yourself and those around you throughout this process. Try to focus on how exciting it is to find your dream home, rather than how long it’ll take. These mindset shifts will make the process a lot smoother when faced with hardships.
When going into the 2022 housing market, stay focused on the end goal and try not to get deterred by any obstacles that may get in your way. At the end of this process, you are going to be the owner of your own home, and that’s what matters most.
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