Something has you thinking about buying a house. Maybe it’s the tax benefits or the investment potential or simply having the freedom to change out that 90’s era carpet for something more to your liking. Whatever the reason, here you are. Before the temptation strikes and you’re scrolling through photos online or sneaking through new construction when the sales reps aren’t looking, take the time to educate yourself on what a strong offer looks like in your market and how best to create one.
Due to the effects of supply and demand, it will be helpful to know if you’re in a buyer’s market or a seller’s market. This can be determined by calculating the absorption rate, which shows how quickly homes are selling in your area. The absorption rate can be calculated by dividing the number of homes sold in a given area during a given time by the number of homes currently listed for sale in that same location. As a general example, between January 23, 2017, and January 23, 2018, there were 3301 closed residential sales in Columbia County, Georgia. This equates to an average of 275 homes sold per month in Columbia County. As of January 23, 2018, there are currently 814 homes for sale. At this rate, it would take almost 3 months for the currently listed homes to sell.
What does this mean for you as a prospective home buyer? A 6-month supply of homes is generally considered to be a balanced market, with neither the buyers nor sellers having an advantage. Less than a 6-month supply is generally considered to be a seller’s market, as there are not enough homes for sale to meet the current demand of buyers in the area. Greater than a 6-month supply of homes is usually considered to be a buyer’s market, as this means there are more homes available than buyers.
If you are in a seller’s market such as the one illustrated above for Columbia County, it will generally mean that sellers can be a little pickier with the offers they receive. For the homes in great condition that are priced competitively, it can also involve potential multiple offer situations. If you find yourself needing to buy during a strong seller’s market, how can you ensure that your offer stacks up well against the competition? In a multiple offer situation, only one of them can be accepted. Let’s talk about how to make sure that yours is the winning offer that turns into you being able to purchase the home of your dreams.
When a seller looks at an offer (or multiple offers) to purchase their home, they are always looking for the best terms, which may or may not mean the highest price. In addition to price, what other things should be taken into consideration to ensure that yours is a strong offer? Here in the Augusta area, a few of the things that a seller may consider in addition to price include:
- closing date – how soon does the seller need to close?
- earnest money – is the seller comfortable with the amount of “good faith” money that you’re providing?
- lender – how reputable is this lender? Can they be trusted to get you to the closing table on the expected closing date?
- type of financing – FHA, VA, conventional, or cash? FHA and VA could mean an additional repair burden placed on the seller if repairs are required as part of the appraisal.
- due diligence vs. right to request repairs – If your offer includes a due diligence period, then you as the buyer can terminate the contract at any time during the due diligence period for any reason. This makes some sellers a little nervous. Perhaps you may want to consider skipping the due diligence period and buying instead with the right to request repairs after your inspection. This could give the sellers the needed assurance that you are serious about buying their house.
- pre-approval letter vs. pre-qualification letter – submitting a pre-approval letter with your offer is the best choice. Pre-approval involves the lender obtaining a more in-depth picture of your financial situation, providing the seller more assurance that you will be able to close.
So what’s the takeaway? When you start your home buying journey and begin looking at homes online, it’s easy to get caught up in the beautiful photos showing trendy updates and neighborhood amenities. As you can see here, there is so much more to be considered. If you haven’t already hired a buyer’s agent to make sure that your interests are fully represented in your home purchase, I would love to find out more about your real estate needs and help you land the home that’s perfect for you. Let me know how I can help! 706-945-7649 or firstname.lastname@example.org