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Take KARE of Your Money: How to get a good deal in this crazy housing market

Here are 10 tips and tricks buyers and sellers can use to stay ahead of the competition.

MINNEAPOLIS — Buying a home is an emotional experience.

It can be fun and exciting, yet scary and overwhelming at the same time.

Especially for first time buyers like Sam and Tessa Chase.

"We knew absolutely nothing. We didn't even know that there was closing costs. So, we were like literally starting from zero,” Sam says.

Sam and Tessa started looking for a home in late January.

They looked at nearly 30 homes and made offers on three of them, but they never worked out.

"We did have offers as much as fifty over asking that weren't accepted,” Sam says.

"There was one offer that when we didn't get it I was almost okay with it because we had to go pretty high over,” Tessa says.

They nearly gave up a few times, and then it happened, on their fourth offer, they landed a nice 4-bedroom, 3-bathroom home in Minneapolis and they close on it next month.

"We feel fortunate that we got a good house in a good neighborhood,” Sam says.

Sam and Tessa are lucky.

It only took them about a month and a half to find a home that they love, and they only had to go $15,000 over asking price to get it, which in this market is actually a pretty good deal.

But not every story ends that way.

In this crazy market a lot of buyers are doing crazy things to get into a home.

Realtors have shared stories about some buyers who were willing to pay up to $75,000 over asking price.

Some buyers are even willing to waive their inspection.

Some are even willing to buy a home just based on the pictures.

That may scare a lot of buyers away from getting into this hot real estate market.

But if you’re smart, and you create a solid strategy, realtors say it’s still possible to find a “good deal” in this crazy market.

Here are some tips and tricks to help you get there:

Tip #1: Take Your Time

Kevin Curtis has been in the real estate game for nearly 20 years.

He says the most important advice he can give to a new buyer is to take your time.

“You have to be patient in this market,” Curtis says.

He says it’s important to understand going in that you might have to look at a few dozen homes and you might have to make five or more offers before you finally get one.

"Those buyers that get a home on their first offer should feel so lucky because it's so rare,” Curtis says.

And don’t get discouraged when you lose out on multiple homes.

“Poor decisions can come into play in desperation,” Curtis says. “That’s when people start throwing out really high offers and start to make decisions based on their emotions.”

Tip #2: Know the Market

In most cases paying full price isn't going to cut it.

Curtis says buyers should expect to always make offers that are over asking price.

“You’re probably not going to get a home for under asking price in the Twin Cities,” Curtis explains.

“We’re seeing homes with 120 showings in three days. That’s a lot of competition.”

Tip #3: You Might Have Waive the Inspection

Most realtors would discourage buyers from waiving their inspection, but Curtis says it’s an unfortunate reality in this market.

“I would bet you it's close to 80%,” Curtis says. “Eight out of ten buyers are waiving inspection in those more average price points.”

But there are ways around this.

Curtis says you could do an informal inspection when you first walk through the house.

"You could bring an inspector with you while you look at the home before you make an offer,” Curtis explains. “There are companies you can hire to help you do that.”

Doing it this way is often cheaper, but it's not as extensive as a real inspection, so the inspector may not catch everything.

Which leads us to tip number four….

Tip #4: Get an Inspection, but set a limit

Sellers don’t typically like home inspections, because it gives the buyer an excuse to back out of the deal.

However, Curtis says a lot of buyers are writing specific clauses in their offer that states they won’t ask the seller to fix anything if the cost is under a certain amount.

“So, you might say that we as the buyer are willing to cover anything up to $5,000,” Curtis says.

“That tells the seller that you’re not going to nickel and dime them with the little repairs.”

This is a great strategy for older homes that are more likely to have hidden problems, like foundation issues or old plumbing.

Sam and Tessa used this strategy to land their home and Curtis says it has also helped many of his other clients as well.

Tip #5: Increase Your Down Payment

This tip is easier said than done.

Some buyers may only have enough to cover a 3% or 5% down payment.

Curtis says you still might be able to land a home with that small of a down payment, but he says the odds are stacked against you.

“To win in this market you really need to be at 5% or even 10%, and if it’s a 20% down conventional buyers, as a seller, you know that buyer is strong and you’re more likely to go with them,” Curtis says.

Tip #6: Make Your Earnest Money Guaranteed

Earnest money is the amount of money you put down in an offer that shows you’re serious about purchasing a home.

A common amount is around $5,000 and traditionally that money will go towards the down payment and closing costs of your home.

Curtis says some buyers are deciding to make some or all of that money guaranteed so that a seller can keep it if the buyer backs out of the deal.

“You can make some of that money, or all of it, non-refundable. Sellers like to see that because that’s a decent amount of money on the table and it means the buyer is less likely to walk away from the deal.”

Tip #7: Negotiate an Appraisal Gap in Your Offer

Appraisals are an important part of the home buying process.

Your bank or mortgage lender will likely order an appraisal of the home to see how much its worth.

“Appraisers have a lot of power in this market,” Curtis says. “They are ultimately there to protect the lender and the buyer. They want to make sure that what the buyer is paying, the home is actually worth it.”

Here’s how the appraisal process might work:

Let’s say the buyer offers $400,000 for a home.

An appraiser might also value the home at $400,000 or maybe even a higher amount.

If that happens, no problem, the mortgage process carries on like normal.

However, an appraiser may value the home at a lower amount, say $350,000.

That means the bank or lender may only be willing to offer the buyer a loan of up to $350,000.

That $50,000 gap can become a huge problem.

On the seller’s side, they might have to simply sell the home for $350,000 or risk losing the buyer.

Curtis says in most cases, the buyer and seller will come to an agreement, but if they can’t, the seller might decide to put the home back on the market.

Obviously, sellers would like to avoid this, so they might be more inclined to accept an offer that has some sort of guarantee from the buyer.

“A buyer can agree going in that they will pay that difference, a certain amount, like $5,000 or $10,000,” Curtis says.

This is another common strategy in today’s market, but Curtis says it’s also risky, because buyers would need to come up with that much cash before the deal is finalized.

“That’s a lot of cash that buyers would need to come up with and so you really need to budget for that if you’re going to put something like that into an offer.”

Tip #8: Find out as Much as you can About the Seller

Let’s be honest, money is the biggest thing sellers are looking for, but Curtis says it’s not everything.

If a seller is looking to close on their home quickly, or they’re looking for a strong buyer who won’t back out of the deal, buyers can use that to their advantage

"That can be done with your agent. Have them call the listing agent on the phone and make that connection. You need to find out what's important to the seller in an offer,” Curtis says.

Tip #9: For Sellers, Don’t Overprice Your Home

Even though it’s a crazy market right now, Curtis says buyers are smart and they know how to value a home.

If they think a home is overpriced, they’ll stay away from it.

"It's strange. In Minnesota people aren't offering less, they're just deciding to watch it and see if it comes down.”

And if a home does come down in price, some buyers and agents may wonder if there’s something wrong with the house.

Then suddenly the seller isn’t getting as many offers and you might not get top dollar for your home.

Tip #10: For Sellers, it’s Still Important to Clean and Stage Your Home

It’s true, sellers have all of the power in this market, but Curtis says sellers shouldn’t get lazy.

He says they still need to clean and stage their home because that will bring in more buyers and more offers and that will lead to more money in the long run.

He says good pictures are also important.

In the end, every situation is different.

An offer that lands you one home may not work on another.

Curtis says it’s important for buyers to find a realtor who is knowledgeable and is willing to go the extra mile.

“There are so many strategies that are being used. It’s all about talking to your realtor and making an offer that you’re comfortable with and also gives you a good chance at getting you that home.”

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