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Home Buying in a Hurry? Don’t Do It. There’s a Better Way.

Your children might be enjoying themselves this summer, but you might be feeling pressure scrambling to buy a house before the new school year starts. It can be tempting to purchase anything just to be done with the process, especially during a challenging housing market. However, buying a house out of desperation or panic can create financial problems and host of headaches down the road.

So what are stressed-out parents to do? By following some "do's and don'ts" buying guidelines, you can position yourself to be a strong, confident buyer. It may take a little extra planning, but in the long run it far outweighs making a huge financial purchase mired in regret.

Here's how to create a solid backup plan you can live with — and getting in the right house at the right price for you:


Plan for the Worst — and Hope for the Best

If the clock is ticking and you have no backup plan, you might be tempted to make a bad decision, such as buying a house that turns out to be a money pit or settling in a neighborhood that doesn’t suit your lifestyle. If you have a solid plan in place, you won’t feel desperate and can calmly assess each house that enters your target market.

Plan B: Renting in your desired location

There are typically plenty of single-family homes for rent. Ask your real estate agent for tips on the best way to find homes for rent in your target area. If you need to sign a year’s lease, try negotiating a set fee for breaking the lease. It’s a hassle to have to move twice, but this plan gets your children in the school you want while providing time to find that dream home.

What if you get under contract after school starts?

If you do go under contract on a house this summer (congratulations!) but can’t close until after school starts, you still might be able to enroll your child or children anyway. Check with your school district. Some districts will allow enrollment even if you haven't closed on a home yet.


Stick With Your Budget

If you find a house you love and don’t want to lose it, don't be tempted to offer more than what you can comfortably afford — or more than the house is worth. Instead of offering too much, it might be better to wait for a better deal to come along.

The preapproval process will tell you the maximum amount a bank is willing to lend you, given a certain down payment. Keep in mind you might be preapproved for more than what you’re comfortable spending. Your lender can write a preapproval letter for the maximum that you are willing to spend (given what your monthly outlay would be). This will help with sticking to a budget and spending only what you’re comfortable with.

The bottom line: You don’t want to be house poor, with too little money for discretionary spending. It's also important to have between three-and six-months’ worth of living expenses in a savings account after closing on the house.

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Some districts will let you enroll your children if you have a house under contract in the district but haven't closed yet.

Don’t Get Emotional: This is a Business Deal

Although houses are quite expensive, you still don't want to overpay for a house even if you love it. Look closely at recent sales (especially ones that have closed within the past 30 to 90 days) to what houses in your target area are worth. Those numbers will illustrate a more accurate picture of a house's value than what the seller is asking. Your real estate agent can provide this information or you can search the internet for recently sold homes in your city or ZIP code. A house appraisal, which occurs while under contract, can also identify the home’s worth.


Don’t Waive Your Contingencies

Contingencies allow a buyer to back out of a deal with no penalties. The fewer contingencies put on the sale, the more likely the offer is to get accepted, especially when there are multiple ones. However, don’t give up the big contingencies — inspection, appraisal and financing. These contingencies are for your protection.

Inspection contingency

The inspection contingency shows what’s wrong with the house. Many items the inspector finds are usually minor problems that a general contractor or handyman can fix. But some problems are major, such as structural issues, a bad roof, or an HVAC system that needs replacing. If problems with the house will be extremely expensive and/or time-consuming to correct, you might want to pass on the home.

Appraisal contingency

The appraisal contingency helps ensure you won’t pay too much for the house. You can choose to pay more, but mortgage lenders typically won’t let you borrow more than 80% of the home’s appraised value.

Financing contingency

The financing contingency gets you out of the deal if you can’t get a mortgage. Note that being preapproved for a mortgage means it's likely you'll get a loan for the amount quoted, but the preapproval isn’t a 100% guarantee you’ll get the loan.


Sweeten Your Offer

Although you want to keep some contingencies, in a tough market it’s wise to be flexible on some items, too, such as the following:


  • Closing date: The seller might want a faster or a slower close. If that can be accommodated, it can help the offer get accepted.

  • Due diligence: This typically lasts 10 to 14 days. The least number of days can be better for the seller. If the seller requests a short due diligence of less than 10 days, make sure you can get a home inspector to come out during this time before agreeing.

  • Earnest money: This is money you put in an escrow account to show the seller you’re a serious buyer. Earnest money is typically 1% to 3% of the house price. The more you’re willing to put down, the more serious you look to the seller. Also note this money can be lost in certain instances if you call off the deal. A real estate agent can let you know what you can and cannot do to avoid losing your earnest money.

  • Rent back option: Also called a seller leaseback or a sale leaseback, this scenario can happen when the seller closes before they have a house to move into. The seller might ask to rent the house back from you while they wait to close on their new home. You might want to allow the seller to do that to sweeten the deal.

Be Willing to Walk Away

When negotiating, the greatest power you have is the ability to walk away. Owning a home in your preferred location is important, yet stay focused on what's best for your family and your finances. That's why having a Plan B or C — and being willing to walk away — should be part of the home-buying strategy. It doesn't mean you should always look for a way out. Do your best to minimize emotions and rely more on the logical aspects. In the long run, you'll likely be thankful you did.

Important Disclosure Information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information. Diversification does not ensure against loss.