Buyers are looking for homes, but inventory is slim. There are simply just not enough sellers putting their homes on the market to meet the growing demand. That puts us in a seller’s market.
You’ve probably heard the terms “seller’s market” and “buyer’s market,” especially if you are either buying or selling a home. Simply defined, a seller’s market means that demand is higher than the supply, while a buyer’s market means that there are more houses on the market than there are people looking to buy houses.
In a seller’s market, there is more competition to purchase the same houses, which means prices can be driven up by demand. In fact, according to a March 2017 RE/MAX National Housing Report, home prices nationwide are reaching a new high, up 6% over last year. The study also reports a supply of 3.6 months, whereas a balanced supply is normally 6 months.
If you are looking to buy a home in a seller’s market, you need to step up your game and avoid making mistakes that could cost you the home you love.
When inventory is low, you need to be ready to act quickly, so meet with your lender to get prequalified before going out to look at homes. This will enable you to make an offer as a qualified buyer who is ready and able to buy, and will prove to the seller that you are serious about making the purchase.
Even before meeting with the lender, once you start to get serious about looking, get your ducks in a row by clearing up any credit issues, delaying any major purchases, and preparing your down payment.
Don’t Bid Too Low
It’s ingrained in us to try to get the best price for our purchase, however, in a seller’s market, you need to come in with a strong offer. Competition is high, and offering a bid lower than the list price, although normally a good strategy, may not grab the seller’s attention. Make your first offer a true one.
Pre-determine the neighborhood where you want to live, the type of home you’re looking for, and the price range with which you are comfortable, and when a home becomes available, don’t hesitate on making an offer. If you over-analyze the price, location, or features, you squander valuable time, and may lose the home. Be prepared to make a decision quickly.
Set Your Purchase Limits
Auctioneers count on the bidding frenzy to raise the final sales price, and when homes are hotly contested, you can also get caught up in the excitement and overbid past what you determined you can comfortably afford. Set your absolute budget ahead of time, and search for homes below your top number in order to allow room to raise your offer if necessary.
Use an Experienced Realtor
Realtors are important allies in your search and negotiations. They not only know the market and its conditions, they are experienced in negotiating, especially when the market is fast paced. Your Realtor can also keep tabs on the inventory and alert you when a new listing becomes available.
You may want to engage the services of a Buyer’s Agent who specializes in working with home buyers. Tell the agent what you are seeking, in terms of size, location, age, style, etc., to help them narrow down your search, and use their knowledge to your advantage.
Keep in mind that you do not pay extra for a Realtor’s services; in most cases the seller pays the Realtor commissions. You will probably be asked to sign a bilateral Buyer’s Agreement; however, that designates your Realtor as your representative. This is similar to a Listing Agreement, outlines the rights and duties of both parties, and serves to protect their commission when the sale goes through. If you are uncomfortable signing this, negotiate the length of that agreement, or ask to “try out” an agent under a 24-hour agreement.
Don’t Become Desperate
If you become frustrated when see you home after home going to Pending before you get the opportunity to see it, you may become inclined to jump at the next opportunity without considering whether it truly suits your budget, goals or needs. Your home is a long-term investment and is too important to settle for something with which you will not be happy, just because you wanted to buy.
Try Not to Fall in Love With a Home
When you finally find the home you want and can picture yourself living there, you are excited to make the offer in the expectation that you will soon be moving in. However, in a hot market, sellers may receive several offers at the same time. Mentally prepare yourself for the possibility that yours won’t be the offer that is accepted on a home, and let that home go if this happens. Look forward to the next opportunity.
House hunting isn’t easy, but the rewards of owning a home certainly outweigh the process of buying it, even if it necessary to buy in a seller’s market. Hopefully, these tips will aid in making your search a little easier.