A Loan Officer’s Advice to Frustrated Home Shoppers

Have you tried buying a house lately?  If you have, you are probably somewhere between frustrated and angry with how your offer was rejected or even ignored by the seller and their agent. Many home shoppers have experienced firsthand the Seller’s Market Blues while making offers to buy a house, any house, over the past two years.  Across the nation the real estate market is experiencing above average demand for housing and below average supply of homes for sale.  The reasons for this housing shortage probably relate back to the Great Recession of 2008 and the ensuing Homebuilder meltdown. The country lost many homebuilders during that time, and the one who were left were reluctant or unable to resume building at the levels seen in the heady days of 2001-2007.  Nearly a decade went by without our nation building sufficient homes to meet our rising need for more housing, and now those chickens have come home to roost.  This is pushing prices up at the same time mortgage interest rates are rising, making the few homes on the market less affordable. As a loan officer with a national mortgage bank, I see a large number of contracts that are submitted to sellers and their agents and I have noted some trends that can be broken down into a list of ‘do’s’ and ‘don’t’s’ when writing an offer to purchase a home.   Let’s start with a few of the Don’ts.

Sellers want the highest price for their home possible and want to do the least amount of work to get it.  So, when you submit an offer to buy a home, you must keep this in mind as much as possible.  Here is the reality; investors and savvy buyers will be bidding against you for the home you wish to buy.  They will make every concession possible to the seller to get their offer accepted, and if you don’t match their offer or beat it, your bid to purchase the home will be tossed aside.  Some of the things that will lead to your offer almost certainly being rejected are; sight unseen offers where you have not visited the home personally, offers with long escrow periods, offers contingent upon the sale or lease of your current home, offers that include financing by out of state or internet mortgage lenders, offers where no mention of what happens if the home fails to appraiser is made, offers that don’t allow the seller to remain in the home after closing should they need it, offers that ignore the sellers preferred title and escrow agents, offers accompanied by low earnest deposits, and offers with financing prequalification’s that don’t match the offer submitted.  Each one of these ‘don’ts’ bears further discussion, so check with your agent or lender for their feedback.

If you’ve had enough of having your offers rejected, countered with impossible terms or simply ignored, there is something you can do about it.  First, and foremost, is the quality of your real estate agent.  The strong agents, the ones with numerous contacts in your local market, listings of their own and who communicate on a high level with the seller’s agent are the professionals who are getting a much higher percentage of their client’s offers accepted compared to average agents. It’s the old 80/20 rule in action, and as usual the top agents are at the top because they are better at doing their job of representing you.  Do not pick an agent because of a family or personal relationship; pick an agent who has the skill and experience to guide you through this process.  If that means you need to change agents, so be it. Next, the quality of your lender and loan officer will make you or break you.  The top lenders will guide you through structuring your offer to meet the seller’s needs and will coordinate with your real estate agent terms that you can live with that will allow you to compete with other offers.  The best of these lenders can be trusted to reach out to the seller’s agent when the offer has been submitted to add more context to the written pre-approval that should accompany your offer. This step is often missed or ignored by many loan officers, and their buyers pay for this oversight. Finally, the terms of your offer are critical to your chances of having your offer accepted and there are numerous ways to improve your offer that your lender should suggest.  These include methods of qualifying for your new home before you sell your existing home so that you can make a non-contingent offer, steps you can take to determine if you can waive the need for an appraisal or handle the ‘appraisal gap’ on the new home, ways to shorten the lender loan processing time to offer the fastest possible close of escrow date to the seller, loan programs that alleviate some pre-existing biases against certain types of loan approvals and finally post possession agreements that many seller’s prefer.   Again, check with your agent and your loan originator to discuss these topics in greater detail.  Understanding these concepts can make you a better consumer and more attractive buyer to the seller of the home you wish to purchase.