It is safe to say that purchasing a home is quite possibly the single largest investment most consumers will make during their lifetime. So, it is natural for them to be a bit cautious, ensuring they understand all the market nuances before making an offer on a home.
Unfortunately, that is not always the case. Some buyers purchase on impulse without checking the current market conditions, often times costing themselves money or purchasing the wrong property in the process.
When you are ready to start looking for a new house (after getting pre-approved and choosing an agent to represent you), it is a smart idea to do your due diligence to determine if the local market favors buyers or sellers.
Buying a home during a seller’s market is not ideal but it is still possible to get a great deal if you know what you are looking for and have patience in the process.
As a reminder, a seller’s market is one where there is 5 months (or less) of available inventory for consumers to choose from. Obviously, the less homes available, the fewer options both buyers and investors have. It can also mean a lot more competition for the existing properties as there are less homes to pick from. It is simple supply and demand!
In this guide, we will explore some of the strategies buyers should employ and provide essential tips on how to find the right home in a seller’s market.
Get Ready To Buy
The easiest way to lose out on the home of your dreams is to not be adequately prepared to purchase a home when you start actively looking for a property. You can avoid that concern by getting your finances in order quickly.
Start talking with a mortgage broker, lender, or financial institution before you hit the pavement to go look at homes. Getting a loan pre-approval will show you your loan ceiling (how high of a mortgage you qualify for) and will also tell sellers that you are serious about buying a house.
Once you have your pre-approval, your agent should be able to provide a list (many are automated) of all the properties that meet your search criteria.
In many instances, they can provide a drill-down to a specific home style, price point, particular amenity (i.e. pool, 3-car garage, acreage, etc.), school district, and a host of other key features that may be important to you.
The more specific your list is, the less time you will waste looking at properties you have no interest in, and the faster you will be able to check out the houses on your short list that interest you the most.
View Homes As Quickly As Possible
When there is a high demand for homes, do not be the buyer who waits until the weekend to view those properties. The faster you can see the home, the better chance you have of getting it contracted.
If you wait, others may are also interested in it and the property may already be off the market by the time you get around to seeing it.
As always, ensure you have an agent that represents you assist with all your real estate needs, including getting educated on anything you do not completely understand or need more clarification about.
When you can, have your agent schedule a visit as soon as the home is available for showings. This is especially important, critical even, for houses where the viewing times are limited.
Getting in quickly for a preview could be the difference between writing an offer on the house and continuing your search because another buyer beat you to it.
Eliminate Buyer Drama
When there are more buyers than homes to choose from some consumers can become overly aggressive. It is understandable that low inventory makes for a more competitive marketplace but you need to do everything in your power to steer clear of conditions that drive bad behavior and poor decision-making.
With the potential for bidding wars, above list price offers, cash proposals, and no/low home contingencies, you can easily get caught in a minefield without a solid exit strategy.
For instance, the vast majority of buyers will be looking for a good deal that includes a decent location and a home that is in reasonably good shape. The competition to see these homes can cause some buyers to act rashly when the same homes are being previewed and viewing overlap is occurring.
To the best of your ability, remove yourself from any situation where an altercation may occur, and you will minimize the risk of making a hasty decision to “beat the competition”.
Home prices often go up slightly during a seller’s market because the supply of homes is limited.
Whenever possible, buyers need to remove as much emotion as possible from their purchasing decision to ensure they do not get into a bidding war or rationalize why it is a good idea to pay beyond what the home is worth, especially if that amount is over the appraised value.
Remember, overpaying today could backfire as the market could become a buyer’s market by the time you get ready to sell.
This is why it is critical to have a buyers agency agreement to work with a real estate agent who understands the local market. Your agent can advise you on the price and provide other relevant information about the community as a whole.
They can also provide tips and information about similar homes in the area that have recently sold or are up for sale.
Once you find a home you want, do not rush into making an offer, even at the risk of losing the home to buyers who are willing to make a quicker decision. Re-look all the numbers and have patience through the process.
You may find you will get the home you want at a price you are comfortable with. When ready, always make a strong offer that will pique seller interest and perhaps get the home before others have an opportunity to bid.
Do Not Ask For Special Treatment
When there is minimal inventory, it is not always a good idea to put too many demands on sellers. This is especially true if the home is getting a lot of activity.
When the market is calm, it is normal for buyers to ask for various appliances like washers and dryers, refrigerators, lawn mowers, etc. as a sort of “freebie” with the home purchase.
You should not apply the same principle in a seller’s market because the odds are stacked in the seller’s favor. If there is more than one offer, you can bet the sellers will take the one with conditions that are most favorable to them.
Often times that is the offer without stipulations so keep that in mind when considering what to ask for as a condition of purchasing the property.
Negotiate In Good Faith
Savvy home buyers will attempt to negotiate for a lower price and favorable conditions any chance they get. You can expect sellers to use their leverage to get the most money for the home they can while giving up fewer concessions.
Being able to bridge the gap and find common ground will help the negotiation process go much more smoothly.
Some of the ways you can accomplish this are to avoid haggling over inconsequential items, determining if the items on your must-have list are really worth potentially losing the home over, ensuring you make a fair offer upfront (fair does not always mean your best offer, but a low-ball offer will typically get you nowhere, especially in a fast paced sellers market), and learning to compromise on issues that appear to be slowing down progress (i.e. closing costs, high cost maintenance/upgrade items, and closing dates).
Buying In A Sellers Market Parting Shots
Buying in a seller’s market is not an ideal situation. However, there are still plenty of opportunities to make it through the home purchase process without much fanfare and still buy the home of your dreams!
If you have a little patience, avoid being bullheaded, and keep your wits about you, the chances of getting conditions and a price favorable to you go up dramatically.
By following the tips provided above you will give yourself every opportunity to turn the home buying experience into a positive one that nets you exactly the type of property you are seeking.
Respect and adhere to the advice your buyers agent provides, while staying within your financial means, and the process of buying a home in a sellers market becomes much less daunting to navigate. Happy house hunting!