Today’s supercharged housing market has flipped the traditional home-buying journey on its head. Nationally, with 22.5% fewer for-sale listings than last year and homes flying off the market in just nine days, aspiring homeowners need to change their approach to win the deal.
Home shopping used to be the first step in the process; now home buyers need to finance first if they want to be competitive. Zillow is sharing the five new steps of home buying ahead of what could be the hottest spring home-shopping season ever, according to a news release.
Step 1: Finance First.
Countless shoppers have fallen in love with a home on Zillow only to later learn it’s outside their budget. Shoppers can avoid the heartbreak by starting with a mortgage calculator and Zillow’s affordability tools to understand what factors impact affordability and what they can realistically afford every month as mortgage rates rise. Aspiring buyers can also see which down payment assistance programs may be available to them in every home listing on Zillow.
In today’s market, buyers can strengthen their offer by getting pre-approved for a mortgage versus getting a pre-qualification or an unverified pre-approval. With pre-approval, all qualifying documents, such as income and assets, are verified by the lender. A new Zillow survey finds 86% of sellers prefer a buyer who has been pre-approved, as opposed to pre-qualified, for a mortgage. And for good reason: Zillow research finds that issues with money, mortgage, or financing is the number-one reason sellers cite for an offer falling through. Buyers can start the pre-approval process online.
This is also the time to shop for a lender. Zillow research indicates some home buyers can save tens of thousands of dollars over the length of their loan if they shop around for the best rate. The difference of just one percentage point in higher interest could add more than $200 to a monthly payment on a typical U.S. home and nearly $75,000 throughout a 30-year mortgage. Buyers can compare multiple lenders on Zillow’s online mortgage marketplace.
Step 2: Hire the Right Agent.
Buyers who mean a business should hire the right professional for the job. A trusted local agent can act as an expert guide during the home-buying journey and share informed, objective advice and emotional support along the way. A seasoned pro can address a buyer’s specific needs and also knows how to best position their client in a bidding war or a tough negotiation, providing a competitive edge.
Hiring the wrong agent can be a recipe for regret. A Zillow survey finds 24% of recent buyers say they wished they had hired a different agent.
Buyers can click Agent Finder on the Zillow homepage to search for local agents, read customer reviews, and check out an agent’s recent sale history before interviewing their top candidates. Hiring an agent early in the process allows shoppers to tour homes and make offers quickly.
Step 3: Shop Smarter with Tech.
Home shopping, traditionally the first step toward homeownership, can be more efficient once aspiring buyers have secured financing and hired the right agent. That puts them in a stronger position to act quickly in a fast-moving market.
Buyers can get another time advantage by embracing new real estate technology. Tools like Zillow’s Homes to Compare let shoppers choose and evaluate as many as five saved properties side by side, all on one page, allowing them to make smarter, faster decisions. Meanwhile, virtual 3D home tours and interactive floor plans give shoppers an immersive experience of a home from their living room, allowing them to quickly narrow down their options and tour fewer homes in person. Nearly 70% of recent home buyers (68%) say 3D tours would give them a better feel for a space than static photos.
Step 4: Make Your Strongest Offer.
Cash is king in today’s hot market, but it’s not the only way to win the deal. According to Zillow’s research, 41% of agents say a cash offer is the most effective strategy for landing a home. When that’s not an option, agents say, they’ve sweetened the deal with a higher down payment or more earnest money to get their client’s offer to stand out. About one-quarter of agents say they always submit their client’s offer before the offer review date.
Unconventional strategies can also be successful. Buyers might think about offering a leaseback, throwing the seller a pizza party, or sending flowers.
Step 5: Close the Deal.
Closing costs can add up to 2%–5% of a home’s purchase price. To reduce those costs, buyers can shop online for qualified title and escrow companies, such as Zillow Closing Services, and compare ratings and customer reviews. To help support an on-time closing, home buyers must be prepared with the necessary documents and responsive to questions from their closing representative.
Buyer Beware: Two Strategies to Avoid
Buyers would be wise to avoid two risky and unnecessary moves: waiving an inspection contingency and writing a letter to the seller. An inspection can identify major structural, mechanical, or safety issues, which could be extremely costly to repair and cause buyer’s remorse. In addition, Zillow’s Consumer Housing Trends Report finds a vast majority of successful buyers (88%) won their homes without waiving the inspection.
So-called “love letters” can reveal demographic information about the buyer and unlawfully sway a seller, putting both buyers and their agents at risk of violating the Fair Housing Act. According to Zillow’s survey of Premier Agent partners, these letters are also the least successful strategy for winning the deal.
Aspiring home buyers are expected to face another spring market marked by affordability challenges and plenty of competition. The new steps of home buying can help them get a leg up, save time and enter the market with more confidence. Zillow can help at every step of the journey with this homebuyer’s checklist, and the products, technology, and partners that make it easier to move.
Source: Zillow Group, Inc.