A “seller’s market” means there are too many buyers compared to the available supply of homes–something that causes prices to skyrocket. Making yourself an appealing buyer is extremely important in a seller’s market, especially when you’re trying to get your offer accepted over countless others. Fortunately, there are a few easy steps you can take to help ensure a better result.
Things To Do:
- Get Mortgage Prequalification
Go to a bank and get prequalified. Not only will this help you know exactly what you can afford, it also helps the seller know that you’re making a serious offer that they should consider. It’s a great way to save stress and time, something sellers love.
- Do Thorough Research
- Find A Great Agent
- Prepare Yourself For Paperwork
- Visit The Neighborhood Regularly
By taking the time to fully investigate all of your options, you’ll be better able to sift through what’s available and focus on the homes that are more realistic. Knowing your stuff is also a great way to make a good first impression when you meet sellers.
Contrary to popular belief, it’s not just the seller that should be using an agent, especially in a seller’s market. There are also agents that specialize in representing the buying party, professionals in the art of negotiation and well versed in what techniques will produce the best results. Instead of one agent representing both parties, you need to have someone that you know is 100% on your corner.
A side effect of the recession, mortgage lenders are now much more cautious when it comes to who they’re giving money to and how much they’re giving. Have all of your financial documents organized prior to meeting with a lender to expedite the process and increase your chances of getting a good deal. No seller is going to wait around for you to figure out your finances while they’ve got other offers on the table.
If you’re considering the purchase of a home, you need to learn as much about the neighborhood as possible. One great way to do this is by visiting the area at different times throughout the day. This will give you a good idea for the general environment that a certain community facilitates. Also consider talking to neighbors and trying out the local restaurants. The more time you put into doing your first-hand research, the happier you’ll probably be with the results.
- You Might Have To Settle (A Little Bit)
- A Little Incentive Might Be In Order
- Give A Strong Offer
- Personally Connect With The Seller
Obviously no one wants to settle with any big purchase, but when the market is highly competitive, you may need to make some small concessions. You don’t have to pick a home you don’t like, you just have to base your shopping more on the features that you need.
For example, if you need 3 bedrooms, start with that. Don’t start by looking for a home on the basis of whether or not it comes with a pool. Compromise with yourself by looking for a home where you could potentially add a pool in the future.
When you’re up against other potential buyers, you sometimes have to provide incentives that make your offer stand out as the best one. Believe it or not, there are plenty of completely legal ways to do this. One of the most effective ways is by offering up as much cash as possible at the point of the sale. Other ideas include waiving fees a seller might have to pay or opting out of conditions that might put the seller at risk, like a seller-provided warranty.
In a competitive market, the worst thing you can do is lowball a seller. Go into the offer process knowing that there’s a good chance someone else will bid the asking price or maybe even higher. Try to stay with your competition. It’s also always good to include an “escalation clause” in your offer, as this keeps your bid rising up to a specified value as other competing offers come in.
Another great trick is to work with the seller when it comes to determining the closing date and the contingencies. Usually they’ll have a preference, and if you’re willing to work with them, you’ll see better results.
This doesn’t mean you should try to become friends with a seller, though it is important to let your personality shine through in every interaction you have with them…even with written interaction like an offer letter. Let them know why you want the house and why it would be the perfect fit for you. It might not be worth much cash, but it could give you the upper hand if two bids on their property are similar and they have to pick which buyer to go with.
Things To Avoid:
- No One Likes A Slowpoke
Time is of the essence in a hot real estate market. Every second you spend waiting around getting your paperwork together is another second that a better offer might come in on the house you want. Don’t lose a deal because you’re too slow on the draw.
- You Don’t Have To Wait For “The Deal”
- Don’t Overspend
In a seller’s market, it can be difficult to make a successful bid on the “perfect” home. Don’t get caught up on finding something that’s got it all, instead consider a home that’s a good starting point that you’ll be able to tailor to your specific wants and needs.
Just because you’re approved for a higher loan doesn’t mean you should buy the most expensive house you can. In a seller’s market, it’s easy to overspend simply because the higher offer might be what it takes to get the house you really want. Keep in mind that even though a house might be perfect, it’s not worth years of financial hardship while you try to pay for it.
- Don’t Settle Too Much
While it’s important to manage your expectations in a competitive market, it’s also important to go with your gut. A home might be in your price range, but that doesn’t make it the right home for you. If the only reason you think you like a home is because you can afford it, you’re probably not at the right place.
Be aware that thinking you’ve found a good deal can cloud logic, hence why infomercials are so successful. If you think this might be the case, bring a neutral party that you trust with you to check out a house. Their insight can help tip you one way or the other, as they’ll probably mention things you haven’t considered. Don’t be afraid to keep renting or wait out the hot market if you can’t find something that works for you.
The Bottom Line
Buying a home is always tricky and a seller’s market can make it even more difficult. Just remember: be quick, be willing to pay the right price, cut the frills, and investigate as many options as possible. You won’t always find an awesome deal in a seller’s market, but if you’re able find the right home and it falls somewhere in your price range, that’s a deal in itself.
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