If you’ve been house hunting, you know the local market is tight. Supply is down which forces prices up. Although Mendocino County is more affordable than some parts of California, it’s getting harder to find property in a price range that’s comfortable for most people. In the real estate business, we use the Housing Affordability Index to assess the percentage of typical families that earn enough income to qualify for a mortgage loan on a typical home in their area.
The affordability index is usually around 30 in California, and slightly better in Mendocino County at around 40. Because the index is based on reported income, I believe our actual affordability index is even higher because we have a lot of unreported income in our neck of the woods. Regardless, we have a competitive housing market and prices are on the rise, so how do you position yourself as an attractive buyer?
The single best thing you can do is to get pre-approved for a loan. To do this, you must go through all the steps required to secure a loan (i.e., provide a lender with all the personal and financial documentation they need for loan approval). This is more than being pre-qualified, which is more like a lender’s nod that you’re likely to qualify for the loan you want. Being pre-approved means all you need to do is add the property address to the loan documents and you’re off to the races.
When a seller is choosing among multiple offers, the one with the highest price isn’t necessarily the best one. Most sellers want a sure thing and are willing to give a little on price if they feel certain the transaction will close. If your competitor puts in an offer at a higher price but their offer is contingent on loan approval when you already have approval in hand, yours may be the more attractive offer.
That said, in this market the buyer who is willing to go to the top of their price range is more likely to come out the victor. Is this the home of your dreams or simply one of many homes you could be happy in? If you really want the home, don’t put in a lowball offer. Decide what the property is worth to you and go all in. Is it the perfect size in the perfect location with the perfect number of bedrooms and bathrooms and the perfect layout with the perfect neighbors in the perfect school district? What’s that worth to you? Don’t be pennywise and pound foolish.
For those rare individuals who can make an all-cash offer, or if you are simply incredibly confident that you won’t have a home-loan issue, you can make an offer that is not contingent upon financing. If you do, be aware that if anything goes wrong, the seller will have every right to keep your deposit. In all likelihood, that seller was depending on the closing of this transaction to make another one possible. You may be the reason they don’t get their next dream home.
The best way to find and secure the home of your dreams is to work a Realtor you like and trust, someone you can work with and who has your best interest at heart. The good news is that there are plenty of them out there who can put their expertise to work for you.
If you have questions about property management or real estate, please contact me at email@example.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.