Rising home prices and falling inventory means today's homebuyer, especially in the starter-home segment, must be prepared to move quickly.
A new report by real estate marketplace Trulia shows that in the nation's most active real estate market, the average home now stays on the market just two months. The hotter the market, the shorter the time between listing and sale.
"In the tightest markets in California, only one in four homes are still on the market after two months," said Trulia Chief Economist Ralph McLaughlin. "Clearly, this spring is not bringing the inventory relief buyers so desperately need.
McLaughlin says today's buyers -- especially those seeking an entry-level home -- need to be ready to move quickly, be flexible with sellers' timelines, and be prepared to make offers on more than one house.
Critical steps to take in advance
But acting quickly does not mean overlooking critical steps in the homebuying process. It just means getting prepared before looking at any homes.
The first step is to get pre-approved for a mortgage. This is not the same thing as the mortgage approval process, which these days can be extremely tedious.
Pre-approval is granted by a mortgage loan officer who reviews you credit report and income to debt ratio and determines whether you can qualify for a home mortgage, and if so, for how much.
This is a critical piece of information because it tells buyers what their price range is. The loan officer will produce a letter stating that you may qualify for a loan of a certain amount. A seller will expect to see this document before even considering your offer.
Location, location, location
Knowing how much you can spend is important. So is knowing where you want to live. The area schools need to be considered, as does the commuting time to jobs. Nearby shopping and amenities may also be considered. In a large metropolitan area, it is a good idea not to limit yourself to one neighborhood, but research several that have homes in your price range.
If you look at a home that has just come onto the market, you may have to consider meeting the asking price if you really want it. Chances are, it will draw multiple offers if it is in a good location and is move-in ready.
A home that has been on the market for several weeks may have issues. If these flaws are not readily apparent, it may take a closer inspection. That's why any offer should be contingent on a home inspection. You can agree on a price in the contract, but if the inspection reveals structural or code issues, you can ask that the seller address them or adjust the price.
First-time buyers who are currently renting may have some added flexibility that enables them to move quickly to meet a seller's timeline. Checking with your landlord to make sure you are on a month-to-month lease means you could close as soon as your mortgage is approved.
To speed that process, it's a good idea to know ahead of time what documents a mortgage underwriter will need and have them ready.
That's why it's a good idea for both seller and buyer to be represented by a real estate agent. Today's real estate transactions that involve financing have grown increasingly complex, and it will help to have pros on both sides guiding the transaction to a successful close.