This is according to Shaun Rademeyer, CEO of BetterBond Home Loans, who says for several years after the 2009 recession there were more homes for sale than buyers, and buyers got used to being able to pick and choose between several options, and taking their time over buying decisions.
He says however, historically low interest rates and steadily rising demand have absorbed just about all the excess stock and, with developers having been so cautious about bringing new projects to market for the past few years, a clear shortage of homes for sale has now arisen in many popular areas. And the result is that an increasing number of buyers are finding themselves in the unfamiliar position of having to compete with other prospective buyers for the properties they want, he explains.
However, a home purchase is still a complex transaction, and they should take care not to make mistakes in the heat of the moment that could cause them many years of financial regret. Rademeyer says the most common mistakes that buyers in a competitive market make is to go into that market without enough cash.
“A lot of lower-priced homes are now being sold for cash to buyers who have spent the past few years preparing for homeownership by ruthlessly eliminating debt and saving up every spare rand so that they won’t have to take out a home loan. It is difficult to compete with such buyers unless you too have cash in hand – at least for a sizeable deposit and all the transaction costs.”
Rademeyer says buyers who do need home loans to finance their purchases need to clean up any blemishes on their credit records and work with a reputable bond originator to obtain pre-approval for a home loan before they go house-hunting. He says this helps give sellers the confidence that if buyers make an offer to purchase, they’ll be able to obtain the necessary loan and go through with the transaction.
Rademeyer says another mistake that prospective buyers make is to put the car before the home. He says your debt-to-income ratio is one of the first things lenders look at when it comes to assessing how well you’ll be able to afford mortgage payments, so it’s important to have as little debt as possible before you go looking for a home to buy.
Next, he says prospective buyers should be sure to actually visit the areas they are interested in, and find agents they can work with who are familiar with these markets and the actual selling prices that are being achieved there – before they start going to show houses and making offers.
“Being able to go through home listings online is wonderfully convenient, and enables you to narrow down your choices to homes that look like they will meet your needs and your budget. But just as it’s wise to visit an area at different times of the day and week to get a feel for what it’s really like, there is no substitute for a trained and reputable agent who knows the local property market and is prepared to share his expertise.”
Then, no matter how competitive the situation is, Rademeyer says buyers should take their time when viewing properties, and not hesitate to call in a professional home inspector if they have any doubts or questions. He says it’s all too easy to miss things that could be expensive to repair in the excitement of finding a home you like and in the heat of a ‘bidding war’ with other buyers.
But you should never, ever let yourself be pressured into making an offer unless you are absolutely satisfied that the property is sound and in good condition, he says.
And finally, home buyers should try to leave their emotions out of things when viewing properties and making offers, he says. “For one thing, this is a major financial decision that will undoubtedly affect their lives for many years, so they should try to make it with a clear head. And for another, it is worth bearing in mind that most sellers are hoping for an offer from someone who is calm and collected and serious about buying their home.”