6 Things Every Buyer Needs to Know When It’s a Seller’s Market
‘Here today, gone today’ seems to describe the current housing market. In times like these, you need a few tips to nab your perfect home before someone else does.
The housing market isn’t just hot—it’s on fire. According to the Federal Home Loan Mortgage Corporation (Freddie Mac), the United States has 3.8 million fewer homes than needed. This is the result of several factors, including builders not keeping up with growth demands and pandemic-related delays that slowed the construction of new homes. In addition, a study by the Wall Street Journal reveals that over 7 million households moved to a different county during the pandemic. Because they were able to work from home, many people migrated from larger cities to suburban areas.
All of these changes have put sellers in an enviable position. As in any sector, when demand exceeds supply, buyers tend to be at the mercy of sellers. If you’re a buyer, you may be getting discouraged seeing so many people competing for so few houses. Don’t despair! We’ve got some tips to help you put your best foot forward.
1. Don’t Go It Alone
FSBO and buying a house without a Realtor are often seen as ways to keep more money in your pocket. In a seller’s market, however, it might be best to rely on a Realtor or broker. These professionals know things that you don’t, they have access to resources and contacts, and they have experience on their side.
“Buying and selling homes is a relationship business, and partnering with a hardworking, seasoned agent is more important than ever,” says Ryan Dalzell, a Realtor with the Dalzell Group in San Diego, California. “With sellers enjoying the upper hand in the market, buyers also need the protection of a Realtor or broker who can make sure that a property is correctly valued, that repairs are negotiated, and that timelines are met so that the buyer can finally land their dream home.”
2. Be Prepared to Move Quickly
There’s a difference between rushing and moving quickly. When you rush, you’re likely to miss the 7 signs you’re about to buy the wrong house. However, once you feel good about your choice, it’s important to move quickly when bidding, advises Melissa Cohn, executive mortgage banker at William Raveis Mortgage. “Having a true lender pre-approval will help to make an offer as strong as possible if you cannot make an offer not subject to financing,” she says.
It’s important to make sure that the lender has everything they need (income and asset documents), which positions you as a stronger contender. “Also, make sure that you have all the cash that you will need for the transaction readily available. If you are getting a gift, try to have it in the bank in advance,” Cohn advises.
In addition, she recommends having your team in place. “Select an attorney and a mortgage banker prior to bidding, and if you present a solid, pre-approved offer with a team at the ready, you should go to the front of the line.”
3. Rethink Contingencies
Here’s something else you need to know in a seller’s market. According to Karen Kostiw, an agent at Warburg Realty in New York City, if you want to be competitive in the face of multiple offers, you may need to submit an offer without contingencies. “Real estate contingencies—for example, the appraisal, financing, home inspection, home insurance, title, etc.—are meant to safeguard the buyer, but, in a competitive sellers’ market, it can affect whether the buyer wins or loses the deal.” She warns against fighting over small repairs after an inspection. “Be reasonable. A seller does not want to spend time and money on small repairs that should be a new buyer’s responsibility.”
4. Be Accommodating
Also, Kostiw says you may be able to negotiate a better deal with the seller if you can make accommodations—for example, being flexible with the seller about the closing. “To be able to do so, ascertain a mortgage commitment with a lender to inform the seller you have a loan and can close on your purchase,” she explains. “When the seller needs more time to leave the home, entertain a residential sale-leaseback.” So, how does this work? The owner agrees to sell the home at an agreed-upon price. “And then the buyer agrees to lease the property back to the seller for a certain period of time,” Kostiw says.
But there’s one thing she doesn’t recommend you try to negotiate. “In a competitive market, it’s best to come in at the price you are willing to pay rather than starting low, hoping to negotiate.” Other buyers are likely to submit strong offers, and with so many options, Kostiw says a seller won’t even entertain what they consider a low-ball offer.
5. Appeal to the Seller’s Emotional Side
He admits it may not work on the majority of purchases; however, Dan Duval, managing partner at Elevated Companies Realty in Boston, Massachusetts, recommends that you appeal to the seller’s emotional side, because many sellers have emotional connections to their homes. “Sellers want to see a family experience their home the same way they did.” As a result, he says that personal letters or even in-person meetings with the seller can go a long way. “These tactics also take the focus off of being solely based on price and terms, and attempt to appeal to the human side of the transaction.”
6. Keep Your Feelings in Check
Speaking of emotions, it’s also important for you to keep your feelings in check. It’s easy to get discouraged, but Duval advises remaining positive. “The vast majority of buyers are in the same boat, but there really is a home out there for every buyer.”
It may take longer than you’d like, but don’t give up. “As long as buyers keep ‘moving the ball downfield’ and learning from previous homes they lost out on, the timing, price, and terms will eventually work out,” Duval says.