Real estate is an especially challenging market this year. The influx of second home buyers and shortage of new construction since 2008 has converted into an increasingly low inventory and strong buyers' market. New homes are coming on the market all the time, but not at nearly the rate of demand by new home buyers, making the search for a new home a scramble. Here are some strategies to help:
Set yourself up for success. Have a long talk with your mortgage officer and Realtor about your financials and the current market. Understand that an FHA, VA, or USDA type loan, while a great way to get around the need for a down payment has strict rules which can be a turnoff for sellers. They require more repairs, typically at seller’s expense, before closing. These also take extra time to close, around 45 days compared to 30 days with a conventional loan. Additionally, asking sellers to cover closing costs is not going to win a multiple bid situation. Unfortunately, avoiding a multiple bid situation is not completely realistic in this market unless you're okay with a fixer upper. This can be a great option if you have the know-how and the room in your budget. Taking the worst house on the block and making it the best increases the property value for the whole neighborhood, including yours.
A direct search on the Multiple Listing Service (MLS) organized by the local Realtors association is a big help. Homes are selling in days, sometimes hours. Most other online services such as Zillow and Realtor.com draw information from the MLS with a delay of several days, so by the time the new house appears on the market it is already pending under contract or has several offers. Going straight to the source for immediate notification when a new house is listed is a huge advantage. With just a little information, any member Realtor would be able to provide you with information on available listings.
Previewing homes can be exhausting, so do homework ahead to narrow the list. Remember that the listing agent is never going to put the bad news in the photos or description and scrambling around to see six new homes as soon as they hit the market will wear you out. A quick Google Earth search will tell you if it's too close to the highway for your dogs or too far from the school or your office for a commute. Driving by it will tell you a lot, too.
If you're unsure whether to wait for a better market, do the math. Interest rates are likely to rise, so use a mortgage calculator to check the compound interest on 1% interest rate in the price range you're considering over the course of the loan, 15 or 30 years. Whatever the answer, ask yourself whether prices are likely to drop that much in a year.
If you're concerned that this market is too similar to 2008, I'll remind you of all the "No credit? No problem!" advertisements on television selling everything from cars to furniture. Currently, a very high credit score is required to even obtain a qualification letter. As frustrating as that is for individual buyers, it's a good thing for the market. Back then, banks gave loans to too many people who couldn't pay them back. When so many defaulted at once, almost all the banks ran out of cash to give credit to anyone, bringing the whole economic system to a grinding halt. "The Big Short" by Michael Lewis both the film and book version, is a great tutorial on what went wrong back then.
Be patient. Know that it may take several failed offers before most buyers find the match that's meant to be. Everyone's in the same boat.