How to Buy a Home and Compete in Denver's Hot Real Estate Market

Now almost midway through 2015, Denver has been experiencing a historic seller's market for most of the year thus far with no end in sight. Why? Low inventory caused by lack of new home production throughout the recession in 2008-2009, and increased buyer demand for housing in Denver. The recession was known as the Great Recession because it was the USA's worst economic breakdown since the Great Depression in 1929. Thanks to economic stimulus spending, the recession ended in the third quarter of 2009 when the nation's GDP turned positive.
It has taken some time but Americans are once again turning to the real estate market to buy and sell their investments. Denver homeowners have seen a significant rise in home values over the past few years. In fact, March was the 39th straight month of year-over-year price gains in the Denver area. Denver's real estate market has been leading the nation for some time now. What does all this mean? Sellers are sweet and buyers are beat. Homes are selling FAST! Buyers are running around like chickens with their heads cut off while throwing their checkbooks at every house for sale desperately hoping a seller will "pick us". Buyers are becoming so desperate that we're seeing people paying 10-30 thousand dollars above appraised value! The demand for housing in Denver has reached new levels of OMG!
So what can you "A Buyer" do in today's market do to avoid this madness and get yourself into a home for a good price, while keeping your sanity and your dignity?


1. BE PREPARED
Are you ready to buy a home? It's a big commitment and most likely the biggest investment you'll every make. Take some time to examine your financial situation. Will you need a mortgage loan? Set boundaries for yourself. When you sign on the dotted line for a home mortgage loan, you are committing to pay a monthly fee for 30 years (30-Year Fixed). What if you or your spouse loses a job? How long could you continue to make payments on the loan without a job? A good rule of thumb is to have a minimum of 9 months of mortgage payments set aside in savings for such a situation. Before deciding to buy a home you must have your "ducks in a row" financially speaking.

2. BE FULLY APPROVED
Unless you're capable of paying cash for a home, you'll need to borrow money from a mortgage lender. It is vital that you partner with a lender who understands the market and employs a creative strategy to help you compete against other buyers in today's market. For example: I know a few preferred lenders who are sending your loan application through "underwriting" before you even make an offer on a home. This is not regularly practiced in other markets, but in today's market it can be the difference between offer accepted or denied. Why is this? Most buyers will give the sellers a "pre-approval" letter that the buyers received from their mortgage lender. This is standard in today's market to show the seller's that you've started the process of applying for a loan. This letter informs the sellers that based on a minimal amount of information the buyer provided to the lender (income, credit score), the lender thinks they might be able to loan the buyer a "x" amount of money. Unfortunately, at this stage of the lending process the buyers ARE NOT FULLY APPROVED. However, when the lender submits the buyer's loan application to "underwriting", the buyer can receive FULL approval of the loan amount. This tells the seller of the home that the buyer is fully approved and almost guarantees that the buyer will receive the loan. This is a big deal! If your lender isn't providing you with this option, find a new lender!

3. MAKE YOUR PURCHASE OFFER STAND OUT
It's not all about price! There are 16 pages to the Contract to Buy and Sell Real Estate. Make sure your real estate agents knows how to prepare a contract that will entice the sellers.

4. SOME HOMES ARE HOT, SOME HOMES ARE NOT!
The Denver real estate market is HOT right? Yes it is, but that doesn't mean that ALL homes are selling in one day. If your real estate agent doesn't know how to find the homes that haven't sold in the first few days then you're in trouble. Creative agents have an eye to find you homes that others don't see. If you like a home that has been on the market for a week or two, guess what? You probably won't have any competition and now you've gained some leverage against the sellers. Your real estate agent should know how to search for homes with this specific criteria. For some reason most agents aren't employing this strategy in today's market and it's a shame! You may also want to ask your agent about For Sale By Owners. This is another route you can take to avoid the buyer competition in Denver.

5. QUIT BEING SO PICKY
"We want granite countertops, we want stainless steel appliances, we want a gas stove top, we want wood floors". These are all upgrades you can make to home after you've purchased. Please consider this option as opposed to move-in ready homes. The homes that are sold with these upgrades are selling for way above asking price with 20-30 offers to compete against. By simply contracting these upgrades yourself after you purchase the home you may be able to save 10, 20, 30 thousand dollars. This is no joke. These upgrades are the number one reason why so many buyers are competing over such few homes. It is really amazing what new paint, flooring and a few kitchen upgrades can do to an "outdated" home.

6. DON'T BE A WEEKEND WARRIOR
Right now in Denver we're seeing the majority of the homes going "Under Contract" over the weekend because that's when most buyers are out looking. Be the first in the door on Wednesday when the house hits the market. The early bird gets the worm!
In closing, please remember this:
Please be smart, be frugal, be resourceful, partner with the RIGHT professionals who truly have your best interest at heart, and you will be a happy homeowner in the great state of Colorado.