You’ve worked hard. You’ve sacrificed. You’ve saved money. You have your down payment and closing costs saved to purchase your first home. Or perhaps you have saved only your down payment because you remember hearing that it is customary for the Seller to pay your closing costs. You have just enough. And you believe that’s enough. Unfortunately, in a market where there are five or more Buyers for the home you want it’s not enough. Not nearly.
In a “hyper” Seller’s market like the one existing today in Central Ohio you’re going to need cash above and beyond the traditional “basics” of home buying. Why? Because you have to offer something that your competitors (others who want the same house) are not offering. All buyers have saved appropriate down payment. All buyers have saved for closing costs. What the winning buyer will have is an extra $2000 or more to give to the Seller in “extras”.
If you don’t have extra cash available to you, you need to plan into your home purchase time to earn extra money above the down payment and closing costs needs. Call it a “side hustle” or pulling from your 401K — you will need to have cash to be used in a variety of ways. The most common way we see cash “win” is in the form of the Buyer (you) offering to pay the Seller thousands of dollars over the appraised value of the home. “Who would do that?!” you might ask. Answer: The Buyer who wants a house in Central Ohio. I have sold hundreds of homes in this market and can count on one hand the number of “winners” in a multiple bid scenario who did not offer to pay some dollar amount over the appraised value of the home. This can be as little as $2000 or as much as $20,000 or more. Another way to use your cash to win is the reverse of a home buying standard: The Seller contributing toward the Buyer’s closing costs. In a Seller’s market we can leverage your cash to pay some of the Seller’s closing costs, thereby increasing their “net” at closing.
Where can you get that extra cash? Look at it as short-term pain for long term gain. Take a second job with a commitment to put all of your earnings in a separate “house” account until you saved $2000 or more. Sell something. I recently helped a young Buyer, Craig. Like many first-time home buyers, he had saved his down payment and closing costs. Understanding the market, he knew he needed a way to come up with an additional $3000 before he was prepared to make an offer on a home. He remembered his non-working truck stored in his parent’s garage. He always intended on getting the truck running. However, after some thought Craig decided that owning a home was more important than the truck. Craig sold the truck for $1800 and took a second job with Lyft. It took three months but by the time we wrote an offer he had $2700 to contribute to “extras” and today is a homeowner.
This blog is written by Kathy Chiero. Kathy is the Team Lead for The Kathy Chiero Group of Keller Williams Greater Columbus Realtors. Thinking of Buying or Selling? Find us www.OurOhioHome.com © 2021 All rights reserved.