Smart strategies to buy a home in a tight market

Remember playing musical chairs? For many eager first-time buyers, house hunting will remind them of that childhood game where everyone was scrambling to secure a place, but someone invariably lost out.

With a limited supply of lower or moderately priced homes in many areas, multiple buyers are often competing for the same home.

“When a property looks good and is priced well, if it goes on the market on Friday, there will be multiple offers by Monday,” says Jim Fite, president, Century 21, Judge Fite in Dallas-Fort Worth.

But if a buyer misses out on one home — or even two, three or more — all is not lost. Determined, flexible and creative buyers can still land a home to call their own, say agents.

Here, a look at strategies that could help first-timers find their way home:

1. Size up the competition.

A competent real estate agent will know a property will attract quick buyer interest. In some cases, a listing agent will even inform a buyer's agent that there are other offers coming in.

Moreover, when there's a flurry of interest, “the selling agent can give you a deadline, like Tuesday at noon, to submit your ‘best and final offer,' ” says Mark Trompeter of Weichert Realtors, Jersey City, New Jersey.

“This term doesn't mean anything legally,” he adds, because there might be further negotiations. Still, in these instances, a buyer will put forth an offer with the highest price he's willing or able to pay, with the most attractive terms (see below) he can promise.

In other scenarios, when to submit your best offer is a judgment call.

“Say a home goes on the market on Wednesday and there's an open house on the weekend,” Trompeter says. “A client might be excited and want to offer right away, but I might say, ‘Let's wait until the open house to see what the interest is.' In the meantime, I will be calling the listing agent to see what's happening and if we shouldn't wait.”

2. Show you're good for the money.

Price, of course, is a paramount concern to sellers.

But sellers must also weigh whether a particular buyer will actually receive the mortgage he needs to actually purchase and pay the promised price.

Here, if a buyer exercises a little extra diligence working with a lender, he can reassure the home seller his financing is sound — and perhaps even beat out another, higher offer.

At a minimum, buyers should be “preapproved,” not just “prequalified.” The latter means that a buyer lets a lender pull his credit history as well as gather information on his salary and job history, and savings.

Expect every viable buyer to be prequalified. Some lenders may go farther, however, and “pre-underwrite” the loan, says Gibran Nicholas, CEO of the CMPS Institute, which certifies mortgage bankers and brokers.

By “pre-underwriting” a lender works with a buyer to secure all the information that can be supplied before there's a specific home the buyer has put forth a purchase offer on, Nicholas says. For instance, when documents like bank statements showing a borrower built his savings for a down payment over a period of months, and his past few income tax returns can speed up processing once a home is selected.

Moreover, agents say some lenders will agree to call the listing agent to assure them they have carefully reviewed the buyer's mortgage application, and anticipate no problems.

A dose of realism, however: Know that despite your best efforts, you could lose out to a buyer who doesn't need financing, but is paying cash.

Indeed, real estate investors looking to rent out a home buy most frequently in the $100,000 to $300,000 range, notes Daren Blomquist, senior vice president, Attom Data Solutions.

The best a first-timer can do to compete is to convey the certainty of his financing, and perhaps show he's the only one who will truly love the home.

3. Sweeten other provisions.

Buying a home is a leap into the unknown. No one, particularly first-timers who may be on a budget, wants to deal with a broken water pipe or dying furnace.

That's why it's standard for a purchase offer to include an inspection contingency, whereby the buyer hires a professional to comb top to bottom, noting any and all defects.

It's risky to not include this contingency.

“When your are buying a home there is often earnest money or due diligence fees,” says Darrell Hess, a Redfin agent in Asheville, North Carolina, and that money could be lost if you submit a contract without an inspection contingency, but pull out when serious flaws become apparent.

However, Trumpeter says a buyer might stipulate that he's willing to absorb the costs of certain projected repairs.

Moreover, a first-time buyer who has a month-to-month rental or a flexible landlord has an advantage over other buyers who must sell a place before closing the deal. Stipulating that you're able to close quickly, or conversely, wait until the seller wants to move, could move your offer to the top.