By Bernadette Starzee
As anyone looking for a house on Long Island in 2021 knows, it’s a jungle out there.
Ongoing low interest rates and an influx of buyers from New York City combined with low inventory have sparked multiple bidding wars and pushed prices up to a record median of $630,000 in Nassau and a record-tying $480,000 in Suffolk, as of late April, according to OneKey MLS.
“Of the 10 homes we sold last month, every single one went over asking price and had five to seven offers minimum,” said Glen Fox, a licensed real estate salesperson who leads the Fox Team at Douglas Elliman in Long Beach.
With so much frenzied activity in the market, you must be prepared to pounce when you find a home you want. Here are five tips to get you ready.
1. Find a good real estate agent to represent you.
A seasoned real estate agent with deep knowledge of the local market can help you fine-tune your search, educate you on market values and negotiate the best deal for you. Sellers are represented by the listing agent, and you need to be represented by a professional who contractually commits loyalty to you. “When I represent buyers, I am looking out for their interests – I will tell them why I think the house is overpriced or underpriced, which will help determine how we present our offer,” said Clare Governale, a licensed real estate salesperson for Daniel Gale Sotheby’s International Realty in Manhasset.
2. Get a thorough preapproval.
In such a hot market, it’s more essential than ever to get preapproved for a mortgage for the highest amount possible by a bank, credit union, or mortgage company. “Keep in mind that not all preapprovals are equal,” said Kristel Weidenman, a licensed real estate salesperson with Signature Premier Properties in Northport. If the lender rubber stamps you after simply asking you a few questions, you will likely be passed over in a multiple-bid situation for a buyer whose lender did the proper due diligence. “Some lenders go the extra mile – running credit reports, asking for paystubs, W-2s and tax returns, and even passing it through their underwriting department to issue a precommitment letter,” Weidenman said. “Their preapprovals are almost like a guarantee.” In addition to the mortgage preapproval, have proof readily available that you are able to put down the amount of cash you are offering.
3. Figure out the maximum you can afford.
The preapproval process can help you figure out the maximum home price you can afford. “In this market, it’s crucial that you know what you can stretch to,” Fox said. You may have a ceiling in mind, but running the numbers may help you realize that a price tag that you thought was out of reach would only amount to $20 or $30 more a month, he added.
Beside the mortgage, you will need to factor in utilities, real estate taxes, insurance and other expenses. “The biggest surprise for first-time buyers is the expense of homeowners’ insurance and, for those who need it, flood insurance,” Fox said. “You may be surprised by which homes do and do not require flood insurance.”
4. Make as attractive an offer as possible.
In this market, you need to put your best offer forward. If you and your real estate agent have done your homework on home values, you should have a good idea of how much you need to offer in relation to the asking price. “Some buyers are at the point of exhaustion and will say outright, ‘I know I’m overbidding for this house, but I’m tired of putting in offers and not getting them accepted,’” Weidenman said. In many cases, going above the asking price is necessary to get the house. “But we don’t want our buyers to overbid crazily,” she said. “You want the comps (recent sale prices of comparable properties) to support the offer.”
Buyers who are financing must realize that if their offer is accepted, their lender will do an appraisal, and if the appraisal is lower than the sale price, the lender may only give a mortgage based on the appraised price. “If your offer is for $900,000, and the house appraises at $850,000, where will the additional funds come from?” Weidenman said. “The buyer may need to come up with the additional cash to make up the difference, or if the buyer doesn’t have the extra cash, the seller may have to renegotiate the price down to meet them.” However, in this hot market, many sellers will not want to renegotiate and lower the price. In order to make their offers more attractive, some buyers have been waiving the appraisal contingency – that is, agreeing to pay the contracted price even if the appraisal comes in low. “Personally, as a buyer’s agent, I do not recommend this approach to my buyers as it can make for a tricky situation,” Weidenman said.
5. Have your other pros lined up.
Besides a lender, you need to have your attorney and engineering inspector on speed dial. “I call it assembling the A-team,” Cardinale said. “Interview attorneys and choose one who specializes in real estate in the local market – not your Uncle Bob who doesn’t do much real estate work.” Interview a couple of engineering firms, too, Cardinale advised, “so you can tell them, ‘I’m bidding on a hot house, what’s your availability next week?’ and pencil them in. Engineers are busy now, so you should have a backup in case the other’s busy.”
A seller that chooses your offer from multiple bids will be breathing down your real estate agent’s neck, making sure the contract is signed without delay.
“In this market, you want to be able to go from an accepted offer to a signed contract in about a week,” Governale said.
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