It’s a tough time to be a first-time homebuyer. In 2021, more than a quarter of first-time homebuyers were unsuccessful at purchasing a home, compared to just 15% of all buyers, a Realtor.com survey found.
See: 4 Reasons You Should Cancel Amazon Prime
Find Out: 3 Things You Must Do When Your Savings Reach $50,000
Even in a competitive market, there are some levers first-time buyers can pull to up their chances of getting the home they want. Here’s a look at the top tactics first-time homebuyers can use this year to close the deal.
Tactic 1: Check Online Listings Every Day
The survey found that as of late 2021, 34% of first-time homebuyers were checking online listings every day — and this is a tactic that could be worth the effort.
“Today’s housing markets are marked by a decade of underbuilding, with a large number of buyers seeking a shrinking inventory of homes for sale,” said George Ratiu, senior economist at Realtor.com. “Declining supply leads to a much faster selling time. In January of this year, homes spent only 61 days on the market, the shortest time of any pre-pandemic year’s fastest month. In many cases, a new listing may get offers within just a day or two of hitting the market.”
For buyers, it’s advantageous to see listings when they are still new, so they can make arrangements to see the home quickly before it’s snatched up by another buyer.
“Leveraging a listing alert that flags new properties as soon as they show up can place shoppers at the head of the line in the process,” Ratiu said. “In a fast-moving market, successful buyers have to move quickly.”
Take Our Poll: How Much of a Tax Refund Do You Expect in 2023?
Tactic 2: Put More Than 20% Down
One-quarter of first-time buyers said they would put down more than 20% in cash to make their offer more appealing.
“In the competitive environment of the past couple of years, buyers have leveraged several options to stand out and close successfully on a home. One of those strategies was to signal a stronger financial position, and therefore a higher likelihood of closing, by fronting larger down payment amounts,” Ratiu said. “The move was intended to let a seller know that the buyer had a more competitive financial position and ability to successfully secure a mortgage.”
He said that this tactic can appeal to sellers, especially if there are multiple offers on the table.
“If weighing multiple offers at similar prices, a seller may naturally select the one with the strongest financial foundation, as it offers the highest potential of success,” Ratiu said.
However, buyers should keep in mind that a higher down payment may not be the be-all and end-all for buyers looking to make a competitive offer.
“Buyers have other components which can be leveraged in an offer: the total offer amount, contingency waivers and closing period, among others,” Ratiu said. “Even for those who may not have 20% or more for an offer, being flexible with the other terms may generate competitive advantages.”
Tactic 3: Make an Offer Quickly
Twenty-two percent of first-time buyers said they would be willing to make an offer within 48 hours of seeing a home.
“In today’s competitive markets, it is not uncommon for sellers’ agents to request that offers be submitted within the first 48 hours of a home being listed,” Ratiu said. “While being first does not necessarily guarantee that you may be successful, it does give a seller more time to weigh the various components of the offer.”
Although acting quickly can be an advantage in a seller’s market, it likely won’t be enough of a tactic on its own.
“Ultimately, the transaction’s outcome will come down to price, financing, contingencies and ability to reach consensus,” Ratiu said. “The offer timing is only one of the factors. Moreover, as market conditions shift, it’s important to consider each property you evaluate. Some markets are seeing properties linger longer than others, and some are even showing price reductions, factors that can change the timing of an offer. As a rule of thumb, however, in today’s market, the sooner you can make an offer the better.”
Tactic 4: Offer Above Ask
Just under 1 in 5 (19%) first-time homebuyers said they would be willing to put in an offer above the asking price.
“Buyers can leverage several aspects of an offer agreement to stand out in a competitive field. Offering a higher price is at the top of the list,” Ratiu said. “The caveat here is that buyers should be mindful of their budget and avoid getting caught in a bidding war that may stretch their ability to meet financial obligations after closing.”
Vincent Birardi, CFP and wealth advisor at Halbert Hargrove, notes that buyers should never sacrifice their financial security to buy a home.
“One should remain mindful of not depleting their life savings and/or raiding their retirement accounts to fund the purchase of a dream home,” he said. “You can borrow for virtually anything in life, but you cannot borrow for retirement.”
Tactic 5: Forgo Some Contingencies
Only 7% of first-time buyers said they would be willing to forgo contingencies like inspections and appraisals to make the deal — but this could add to the appeal of your offer.
“In real estate transactions, there are several customary contingencies that make a successful closing, depending on identifying and agreeing to various issues,” Ratiu said. “A home inspection contingency ensures that a buyer has the right to inspect the home and request that the seller provide any repairs or modifications to fix damage or shortcomings. A mortgage contingency gives the buyer the right to exit the agreement in case they cannot secure a mortgage. Similarly, an appraisal contingency gives the buyers leverage if an accredited appraisal of the home comes below the asking price. Buyers can consider all of these clauses when making an offer, depending on their individual circumstances and financial abilities, in order to stand out.”
Tactic 6: Make an All-Cash Offer
If you’re financially able to make an all-cash offer, this is a good way to make your offer stand out. Sixteen percent of first-time homebuyers said they would use this tactic to get a leg up above the competition.
“An all-cash offer removes several obstacles in the transaction process,” Ratiu said. “Anecdotally, many all-cash buyers have been successful in closing on a home, even if their sale price was slightly below other competing offers that may have required financing.”
More From GOBankingRates