How to Buy in a Tight Market

June 2023

Increase your chances of getting your dream house in a competitive housing market.

Get prequalified for a mortgage. 

You’ll be able to make a firm commitment to buy and your offer will be more desirable to the seller.

Stay in close contact with your real estate agent. 

Your agent will be on the lookout for the newest listings that meet your criteria. Be ready to see a house as soon as it goes on the market - if it’s a great home, it will go fast.

Scout out new listings yourself. 

Browse sources such as realtor.com and local real estate listing sites. Set up alerts for the neighborhoods and characteristics you’re looking for. Drive through your target neighborhoods, and if you see a home you like for sale, send the address and listing agent’s name to your agent, who can schedule a showing for you.

Be ready to make a decision. 

Spend plenty of time in advance deciding what you can afford and must have in a home so you won’t hesitate when you have the chance to make an offer.

Bid competitively. 

Your first inclination may be to start out offering something less than the absolute highest price you can afford, but if you go too low in a tight market, you will likely lose out.

Keep contingencies to a minimum. 

Restrictions such as needing to sell your home before you move can make your offer unappealing. Remember that, if the market is tight, you’ll probably be able to sell your house rapidly. You can also talk to your lender about getting a bridge loan to cover both mortgages for a short period.

But don’t get caught in a buying frenzy. 

Just because there’s competition for a home doesn’t mean you should buy it. And even though you want to make your offer attractive, don’t neglect inspections that help ensure the house is a sound investment.

- Courtesy of Cloud CMA

CMAs vs Appraisals

May 2023

Establishing a home's market value is equally important to buyers, sellers, lenders and real estate professionals so that listings can go on market and transactions can proceed quickly and efficiently.

A real estate professional may prepare a comparative market analysis (CMA) for their sellers to help them establish a listing price. The CMA includes recently sold homes and homes for sale in the seller's neighborhood that are most similar to the seller's home in appearance, features, and general price range.

Although the CMA is used to help determine current market value, it does not establish the seller's home value. The CMA is merely a guide to help the seller learn what's happening in their local market, so they can better understand where their home fits in term of an estimated listing price, based on location, features and condition.

Once the home is listed on the open market, a buyer makes an offer, which could be based in part on a CMA the buyer's agent has prepared. CMAs can help buyers better understand the local market as well as sellers.

If the buyer is receiving financing through a bank, the bank will order an appraisal.

Unlike the CMA, a bank appraisal is a professional determination of a home's value. The appraisal is completed by a licensed appraiser, using guidelines established by the Federal Housing Finance Agency, which regulates federal housing loan guarantors such as FHA, VA and housing loan purchasers Fannie Mae and Freddie Mac.

An appraisal is a comprehensive look at a home's location, condition, and eligibility for federal guarantees. For example, a home that doesn't meet safety requirements such as handrails on steps will not be eligible for FHA or VA loans until the handrail is installed or repaired.

Appraisers use the same data in their market research to find comparable homes as real estate agents. While they are also members of the MLS, they also have additional guidelines from the bank to follow that minimize risk to the bank. They will take into consideration - and can adjust values to reflect - the speed of the market and whether prices are rising or falling.

When the appraisal is finished, the bank makes the decision to fund the loan, or it may require the seller to fix certain items and show proof that the repairs have been made before letting the loan proceed. If the loan doesn't meet lending guidelines, the bank will decline the loan.

Despite stricter lending and appraisal standards, most buyers' loan applications go through to closing - nearly 85 percent. One reason for that is that real estate agents are preparing CMAs that are better tuned to lending standards, for sellers and buyers to fully understand not only what the market is doing, but how much lenders are willing to finance.

- Courtesy of Cloud CMA