Buying a Home in a Seller’s Market: What to Know
Whether you’re thinking about becoming a homeowner for the first time or you’re looking to buy your second, third or fourth home, buying in a seller’s market can be tough. That’s because, as Redfin notes, a seller’s market is what happens when there are more buyers wanting to purchase homes than there are available houses on the market. More buyers also mean a greater chance of getting into a bidding war, which benefits the seller. Either way, the seller has the upper hand because chances are, their property will sell quickly and possibly even over the listing price.
It’s currently a seller’s market now, and while they may change soon depending on your specific location, in most places you’re going to face some challenges as a homebuyer. Here’s what you need to know to get through those hurdles and buy that ideal home you’re looking for.
Before you even start looking you should get preapproved by a mortgage lender. In a seller’s market, it’s safe to assume that you’re going to be going up multiple other offers, and if you aren’t already approved, yours is likely to be one of the first to get shot down. Speed is the name of the game which means show a pre-approval letter will not only show the seller you’ve been vetted financially, but you’ll be able to act much faster when you find the home you want.
Keep Your Offer as Simple as Possible
A seller’s market isn’t the time to ask for a 5-day closing. Unless the house is empty, few sellers can manage to get everything packed and ready at a moment’s notice. Another issue may be contingencies, which are usually included, such as completing inspections – they’re necessary for the transaction to move forward. But at the same time, sellers often see contingencies as potential roadblocks that can lead to a deal falling apart, which is why they’re more likely to choose the offer that comes with the least risk possible. In this kind of market, you may see people reducing or removing contingency periods to make their offer more competitive. At the same time, keep in mind that if you decide to waive something like inspections that means you’ve agreed to purchase the home regardless of any existing problems. Ask yourself honestly if you’d prefer buying it with all of its potential issues, or wait until another home comes on the market that doesn’t come with as much risk.
Money talks, and a higher offer is probably the No. 1 way to get your offer noticed. Sellers are far more likely to choose yours if it’s a cash offer, or if it will provide them with a good payout. Of course, you’ll want to stick within the budget you can afford, with your pre-approval amount considered the maximum, but that also means to get your offer accepted you’ll probably have to at least meet the asking price and possibly above it.
Include an Offer Letter
Sellers are going to be looking at the amount you offer and other factors, but when they’re dealing with multiple offers, they tend to blend together. You can stand out from the rest by including an offer letter that explains why he or she should choose yours. It should be short and sweet, telling the seller why you’re the perfect buyer for their home with a few reasons you fell in love with it. It helps the seller to connect with you emotionally, giving you better odds of success.