How to Buy a Home in a Seller's Market
- Jun. 3, 2021
- Brian Harris
- Personal Finance
In many parts of the country, potential homebuyers are noticing the low number of homes for sale. According to many real estate analysts, the situation looks like it’s not going to change any time soon, as more Millennials decide they are ready to make their move into homeownership. That’s why it’s more important than ever to know the best way to purchase your next home in a seller’s market.
Is it Bad to Buy a House in a Seller’s Market?
With mortgage rates continuing to be low, you may be thinking of buying your first home or upgrading to a new one. However, news of a shortage in building materials and the number of houses available, may have given you a pause to consider if this is still the best time to buy a home. The following information could help you make an informed choice and help you get the home you want at the right price.
How Do You Get the House You Want in a Seller’s Market?
With demand for housing increasing faster than supply, home buying in some areas of the country could soon qualify as a competitive sport! Here are some tips to help you come up with a winning bid if you live in one of these areas.
Educate yourself. First, it’s important to find out what it takes to buy a home. Once you have a good understanding of this, you can make wiser decisions.
Know what you want. In a tight real estate market, being decisive is key. Once you see what you want, you will need to act.
Get pre-approved. After a bit of research, speaking with a lender will help you confirm whether the information you’ve found applies to your unique situation. When you’re ready to purchase a home quickly, getting preapproved can provide you with the information you need to purchase a home smoothly and with confidence.
Have a number in mind. With the currently limited supply of lower- and mid-priced homes, you will need to decide just how far you can comfortably stretch financially before you start searching. Looking at homes beyond that range in hopes that a seller will accept a lower offer is a strategy that works best in a buyer’s market.
Have financing lined up. Be prepared with a preapproval letter from a Loan Officer and have your down payment ready to go. It may be a good idea to sell your current home first if you are trading up so that you have cash available for your purchase. Those who can close the fastest typically have the advantage with sellers.
Be considerate. Being available for showings on the seller’s terms is essential. This may mean asking follow-up questions via email and being quick to respond to communication when possible.
Show them the money. Expect to put more money down when you are submitting your contract. The more you can put down the more serious you will look. This is known as earnest money, and it shows the seller your intention to purchase. Also, you may be in a better position if you submit your best offer first. Sellers may not be inclined to negotiate when multiple offers are likely.
Minimize contingencies. In a seller’s market, you are more likely to make concessions than the seller. That may mean adapting your closing schedule to theirs. It also means that an offer contingent on selling your current home is not as likely to be accepted.
Level set your expectations. In normal markets, a seller will leave appliances and drapery—perhaps even furniture—or clean and refinish floors before listing. In a seller’s market, such niceties may not be present.
Be ready to walk. In a seller’s market, it is easy to buy into emotional decision-making. While appeasing the seller will get the sale done, that doesn’t mean skimping on essentials, like a thorough inspection, or overpaying for the condition of the home.
Should You Offer Over Asking Price?
In today’s housing market, it is not uncommon for potential homebuyers to ask for more than the seller’s asking price. But is that right for you? Keeping in mind you will have to outbid the competition, your decision will depend on how much you want the house and if exceeding the asking price will put the property out of your price range. It ultimately comes down to doing your research and determining if the house is worth it.
So, How Do You Win in a Seller’s Market?
When buying in a seller’s market, keep your eye on the prize. More than just closing on the purchase, it is still about finding the right home at a price you can afford. Want to get a better idea about how much home you can afford? Check out our mortgage calculator to calculate what your monthly mortgage payment may look like.