There’s been a lot of stories in the local and national media over the last couple years about Denver’s real estate market. If you were to believe everything you read, you’d think it was a horrible time to buy, every property available goes for well over asking price, and that you probably won’t be able to purchase the home you want since there’s so much competition out there.
The truth is, it’s actually still a good time to buy and there’s data available to prove this. Home prices and rents are still continuing to rise and will continue to do so for the foreseeable future. At the same time, mortgage rates remain at historically low levels despite the Federal Reserve raising the rates last year. If you delay purchasing a home based on what you read, you may end up losing out on a lot of equity through appreciation and paying even more for rent as rents continue to rise.
However, the media is right about one thing- it’s very tough out there for buyers right now. Although it’s more difficult than it has been in the past, there are several things you can do to have success as a buyer in this market. The first and possibly most important step is to come prepared. Prepare yourself by getting Pre Approved with a lender BEFORE you start looking at homes. This not only gives you a price range, but also helps you act quickly when you do find your dream home. The second part of being prepared is planning out a strategy with your agent. At BlueMatch we can help you identify exactly what you’re looking for in terms of features and location, offer useful advice that has worked well for other buyers in your situation, and create a plan that’s based off of current market data and your timeline.
Below are some helpful tips you can use right now to navigate this market as a home buyer:
1. Try to go on showings during the week. If you work Monday through Friday, you can oftentimes schedule to see properties after work or during your lunch hour. The majority of buyers go on showings during the weekend. Many properties receive multiple offers over the weekend, and so if you’re able to put in an offer during the week with an acceptance deadline before the weekend, you may be able to better avoid a bidding war.
2. Consider properties that need cosmetic repairs or just plain don’t show well. Replacing carpeting, refinishing wood floors, painting, updating appliances, and other cosmetic changes are probably less expensive than you think. Most buyers prefer a completely move in ready home, but by acting differently you can potentially save tens of thousands of dollars while only spending a few thousand in upgrades before moving in. Less competing offers means a lower price for you as the buyer. We can help you estimate these costs and help work out how to pay for them.
3. Give For Sale By Owner properties a chance. These properties get much less exposure to potential buyers than those listed on the MLS. If the property is priced appropriately to begin with, there is often much more room for negotiation since you’re not competing with as many buyers. It’s important to use an agent when dealing with these properties as the owners may not be aware of the disclosures required, the buying process, and how the contract works in Colorado. Buyers have a lot of power within the Colorado Contract to Buy and Sell, so you want to make sure you’re able to exercise your rights and are legally protected. The good news is that the majority of these sellers are willing to pay a fair commission to the buyer’s agent for their expertise since they’re not paying for a listing agent. At BlueMatch, we’ll happily help you find these properties and craft a competitive offer.
4. Strengthen your offer through non financial means. There are several things you can do to make your offer more competitive without offering a higher price. You can write a personal letter to the sellers letting them know about your situation and why you love their home over others you saw. Many sellers have a strong emotional connection to their home and want the next owner to enjoy it as much as they did. Some other things that will strengthen your offer are adjusting the closing time to when it’s most convenient for the seller. You can let the seller know that although you’re going to inspect the property, you won’t ask for any repairs unless there’s a major issue you were not aware of when first seeing the home. You can offer to pay over the appraised amount if the appraised value comes in lower than your purchase price (up to a certain amount). Using the strongest financing you have available to you as well as the largest down payment you’re able to make will also help strengthen your offer. If you’re able to pay cash, you can always refinance the home shortly after the purchase. This will make your offer stronger than a financed offer while still giving you the ability to take out a mortgage after closing.
5. Use an escalation clause to avoid over paying. By adding this to your offer you can pay $500-$2,000 over the highest offer up to a certain maximum amount that you choose. This allows you to pay a smaller amount over your competition and helps you avoid paying several thousand dollars over the next highest offer. Keep in mind that some sellers will not consider escalation clauses for this exact reason.
In addition to the strategies above, there are several others not mentioned here that can be very helpful. Give BlueMatch a call today and let us help you develop a custom plan to get you into the home of your dreams! We’ll help you avoid the pitfalls of this market and lead you to a successful close.