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The Ultimate Buyer’s Guide to a Competitive Housing Market

Buying a home is one of the biggest and most exciting experiences in any person’s life. Nothing beats the feeling of owning a piece of property that fits your needs and wants.

But the process of home ownership can be challenging to a lot of people, especially first-timers. And, given the current market, where there are more buyers than houses for sale, owning a home becomes even more of a challenge. While you can’t control the market, you can learn how to deal with it.

Whether you’re buying your next home or your first one, here’s a comprehensive buyer’s guide on how to conquer a competitive housing market.

About Napa, CA real estate

It’s no secret that Napa is one of the hottest real estate markets in the country. Known for its rich history, world-renowned wines, and laid-back lifestyle, Napa is the largest town in Napa Valley and the birthplace of California’s world-famous Wine Country. Its reputation as a vacation destination and an exceptional place to live are top reasons real estate here is highly sought after and make them an excellent long-term investment.

When you look at Napa Valley real estate, you’ll find some of the most luxurious properties in California. Every property has its own distinctive style and character. Mediterranean, Contemporary, European-style villas, and Farmhouse are among the popular architectural styles.

A Napa home averages 1,566 square feet. The average price per square foot for a Napa home is $511, with the highest at $2,288.

Home appreciation rates in Napa, CA are one of the highest anywhere. According to Neighborhood Scout, real estate in Napa increased in value by more than 78% over the last 10 years. Home prices appreciate nearly 6% annually.

Buying in a competitive housing market

A competitive real estate market can be downright intimidating. To boldly jump into the fray and emerge with your prized piece of real estate, it’s important to understand the dynamics of a competitive housing market and how to stand out as a buyer.

What are the signs of a competitive housing market?

A competitive market is a seller’s market. When demand exceeds supply, sellers are at an advantage. There’s no easy way to predict when a particular real estate market will be favorable for buyers and sellers. While there are more homes for sale during summer, location and local economy also dictate inventory.

So, how do you know if you’re in a competitive housing market? These are the signs:

  • Low housing inventory
  • Because of the large number of interested buyers, the number of homes for sale shrinks. It’s harder to be selective since there are fewer houses to choose from. Ask me about the number of available homes in your chosen area. If it has less than six months of available inventory, it is most likely a seller’s market.

  • Multiple offers
  • When properties are in high demand, sellers will be flooded with multiple offers from different buyers. Multiple buyers interested in a single piece of property can also lead to a bidding war. In this situation, buyers compete for ownership by topping the bid or offer from other interested parties.

  • Homes sell faster
  • Another way to tell if you’re buying in a competitive market is the average number of days a home stays on the market. Properties typically sell faster in a seller’s market. Some homes even get sold before they hit the market. Looking at the past homes that were recently sold (whether it’s within the past few months or years) can help determine the type of market you’re in.

  • High real estate prices
  • The real estate prices are a good indication of whether you’re buying in a competitive real estate market or not. In a sellers’ market, homes are typically sold at their asking price or above it. Sellers may also set a high starting price since they have the upper hand.

  • Cash offers
  • When buyers want to stand out during a competitive market, they compete with cash offers. Cash offers are appealing because it gives sellers a faster closing time (no need for mortgage companies to order a home appraisal to compare the market value of the home vis-à-vis the loan amount requested) and doesn’t require a lot of the usual contingencies.

Getting a mortgage pre-approval

Obtaining a mortgage pre-approval proves that a lender has verified your financial information and how much house you can afford. Once your chosen lender has approved the amount of mortgage you can borrow, you’ll be given a pre-approval letter containing the loan type, the loan amount, qualified interest rate, and other terms and conditions.

For luxury homebuyers, jumbo loans are the way to go. This type of loan is used to finance properties that are above the loan limits given by the Federal Housing Finance Agency (FHFA). Due to the greater risk that comes with lending a larger amount of money, the credit requirements for a jumbo loan are stricter than conventional loans. And while the interest rate for a jumbo loan is typically higher, it ultimately depends on your lender and your finances.

Take note that getting pre-approved is different from getting pre-qualified. While pre-approval is more specific, pre-qualification only gives an estimate on how much you can borrow. Through pre-qualification, you have an idea of your financial readiness and the type of mortgage loans that you can take out. Even if a mortgage pre-approval letter isn’t an absolute guarantee, having one shows the seller that you’re serious about buying their home.

Since pre-approval requires more documents and proof of your financial history, it carries more weight. Lenders look at your income, employment, credit report, assets, and debts. Those requesting pre-approval must also submit their Form W-2 (Wage and Tax Statement), a summary of their assets and total monthly expenses, bank statements, and current pay stubs.

To get pre-approved, prepare the necessary documents ahead of time and get in touch with a good mortgage lender. Mortgage loan applications can be filled out online, over the phone, or in person. The pre-approval process usually takes around one to three days. After receiving your pre-approval letter, you’ll have around 60 to 90 days to use it before it expires.

A strong offer takes the lead

Coming up with a strong offer can work wonders. It gives you an edge and it makes you stand out from other buyers. There are several ways to create a purchase offer that sellers can’t say no to, from making bigger down payments to limiting certain contingencies.

A down payment, which is a percentage of the home’s purchase price paid upfront, has an important role when it comes to buying a home. While it’s typical for buyers to haggle their down payment to less than the standard 20%, it could be risky in a sellers’ market. Offering a larger down payment, which is paid for in cash, shows the seller that you’re financially capable and prepared.

Contingencies are usually included when making an offer. A contingency clause indicates an action or a condition that the seller must meet for the sale to move forward. These contingencies may focus on home inspection findings, financing, appraisal, and title. With a contingency clause, either the buyer or the seller can back out when the specified contingencies aren’t met.

Consider simplifying your offer by removing certain contingencies or reducing the contingency period. Having several contingencies lengthens the negotiation process. However, only do this if you feel comfortable with the idea.

Tips for navigating a seller’s market

If you plan on buying a home in a competitive market, here are my top tips for home buying success:

  1. Start the pre-approval process early
  2. While waiting to get approved may take only a few days, preparing the necessary documents and searching for the right lender may take much longer. Along with the duly accomplished application form, you also need to submit several financial documents. Having your pre-approval letter ready also speeds up the process since you’re already well on your way to finalizing the mortgage.

  3. Determine your real estate needs and wants
  4. Identifying what you need and what you want in a home is an important step at the beginning of the home buying process. But first, let’s differentiate between the two. A home buying need is a feature that you cannot live without , something that the home must absolutely have. A home buying want, on the other hand, is a nice feature to have but isn’t necessarily a deal-breaker.

    How many bedrooms and bathrooms do you want in the home? Are you looking for a particular house style? What do you look for in a neighborhood? Should your home be located close to schools, restaurants, shopping, and other establishments?

    Knowing your real estate needs and wants is especially useful when buying in a competitive market because you already know what to look for.

  5. Understand the local market
  6. One of the most common mistakes made by buyers in a competitive housing market is not understanding the local real estate market. Whether it’s a town, city, or neighborhood, each local real estate market is different from the other. You’ll also be able to identify trends and zero in on relevant information.

  7. Learn about the seller’s real estate goals and needs
  8. When you’re in a competitive housing market, a little research can go a long way. Aside from understanding the local real estate market and its trends, it also helps to learn more about the seller of the house you’re interested in.

    Sellers are more likely to pick buyers who accommodate their closing preferences. Whether they want to move out of the home quickly or continue staying there for a couple of months, adjusting to their needs will give you an advantage over other buyers.

  9. Work with a trusted real estate professional
  10. Having a real estate agent by your side is key to navigating a competitive housing market. A Realtor does more than help you look for the perfect home. They also assist you with writing a competitive offer and use their network to connect you to related service providers. A real estate agent provides great insight on whether you should keep pursuing a particular home or walk away.

    A Realtor will also present you as an ideal buyer, especially in today’s market. They will help you craft your offer to appeal to what the seller wants.

    Look for an agent that’s responsive, reliable, and honest. I would love the opportunity to be your Realtor

  11. Keep an open line of communication
  12. Communication can make all the difference in a real estate transaction. And in a fast-paced and competitive real estate market like Napa Valley, communicating with your agent often can lead to a successful home purchase. It’s also important to keep your lender in the loop about the house-hunting process. This way, they can have the necessary paperwork ready when the real estate transaction starts moving forward.

  13. Come prepared
  14. In today’s market, you have to move quickly. Once you have your pre-approval letter, start looking for potential homes. Remember your home buying needs and wants because this helps you focus on properties that meet your criteria. Keep your eye out for virtual showings, in-person tours by appointment, and, under ideal circumstances, open houses. If you see an interesting home on the market, don’t wait for the weekend to check it out.

    And if you’ve already set your sights on a particular property, request a showing and start positioning yourself as a serious buyer. If a physical showing isn’t available, request a virtual one. Most properties in competitive markets only last for a day or two before they’re gone. Time is of the essence!

  15. Be flexible
  16. Buying in a competitive real estate market requires flexibility. Since demand is high and inventory limited, you might need to refrain from holding out for the perfect home. If you can’t find the right home in a certain area you want to live in, you may need to expand your search and look at the surrounding towns or neighborhoods.

    Keep an open schedule as well. You never know when a potential property can become available for private showing or viewing.

  17. Be patient and stay focused
  18. With the amount of pressure and competition in a hot housing market, it can get very frustrating to lose your bid to another buyer. If you feel the need to change your home buying strategy, talk with me and decide on what you can do differently.

    And as much as possible, don’t get caught up in a bidding war. You’ll only end up spending more money than what the home is actually is worth.

Ready to buy a home in Napa Valley?

If you’re looking for a long-term real estate investment, Napa is the top choice. The city’s prime location, top-notch amenities, and spectacular views are just a few of the many reasons why these properties are in high demand.

When it comes to Napa Valley real estate, there’s no better Napa Valley Realtor to work with than me, Joe Brasil. I’m a top producing global luxury certified real estate agent with more than 16 years of experience in real estate. I know how to handle every situation in a professional manner, especially in a competitive market.

As your trusted Realtor, my goal is to ease the buying process and provide a smooth, stress-free experience. You can rely on me to provide the skills, knowledge, and representation that will help you navigate Napa Valley’s hot housing market.

Start your Napa Valley California real estate journey today! Give me, Joe Brasil, a call at 707.319.1887 or send me an email at joe(at)ownnapa(dotted)com. You can also browse Napa’s incredible real estate offerings here.

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