How do First Time Buyers win in 2024?

I'm fortunate enough to work with all types of clients. I work with seasoned investor sellers, retirees who are downsizing, families needing a bigger home and needing to sell their previous home, people relocating to and from Cleveland for work, and everything in between. One of my favorite categories of clients is first time buyers. In this competitive market, what advice do I give to first time buyers?

1.) SAVE.

Most of my first time buyers do not put down 20%. As a matter of fact, a majority of mine are putting down 3%-5%. But, buyers still need funds to cover a smaller down payment, closing costs, reserves, moving costs, and miscellaneous expenses tied to the process. If you want to know how much you should save, please reach out and I can go over your situation to give my guidance

2.) Conventional > FHA

If at all possible, being pre approved for conventional financing gives you a leg up against those who are pre approved for an FHA mortgage. The reality is, there isn't a tremendous difference between the two. FHA on occasion is more likely to have the seller make required repairs before closing. This fact alone gives the idea to many sellers that FHA financing is less appealing, and the reason why going conventional (when possible) gives you an advantage in multiple offer situations. Perception unfortunately is reality, and conventional is better.

3.) Pre Approval > Prequalification

Many outside of the industry don't understand the difference between the two. A pre approval has had a potential buyer pull their credit and submit income/asset statements. It is much more valuable than a prequalification, which is typically stated income, assets, and potentially no credit pull. When I list homes, I put prequalifications in the back of the line, behind cash and pre qualified buyers.

4.) Offer Deadlines OR Escalations

One strategy my more aggressive and savvy buyers use is to put an expiration time on their offers. This will put the pressure on the sellers and potentially eliminate multiple offers. Another strategy would be a price escalation. Essentially, this addendum can automatically increase a buyer's offers by a certain number if another bona fide offer is presented to the seller. This means you are bidding against your competition, and not yourself. Keep in mind, there are positives and negatives to both of these options.

5.) Local Lender

Working with a local lender will give you a huge advantage versus offers accompanied by a large, out of state bank. Many listing agents (including myself) have been presented false pre approvals by banks who are notorious for not doing due diligence before a pre approval. With that in mind, many sellers do not accept such documents. And, those buyers essentially have very little chance to be competitive.

I have another 20 or so tips I could have added in. A lot of things a first time (or 10th time!) buyer can do to stand out. Let me know if you know anyone who I can assist with this in 2024.

Cheers,

Pat