Surviving a Home Seller's Market
House hunting is challenging enough at any time; shopping during a seller's market is even harder - and that's what home buyers are seeing. The supply of homes is low, demand is high, and sellers are in control. If you’re not being careful, you could be left drying your eyes with your rejected bid.
Best bet, bring your A-game, or don't bother.
Even when you hear it’s a seller's market, where's the proof? While the market signs varies, you can watch for these two indicators:
- Houses are selling for more than asking price.
- Houses sell quickly, and inventory doesn't hang around.
Check out your area. If the majority of houses have been sitting on the market for more than six months, it is not a seller's market. But if only those ultraluxe properties have been on the market for over a few months, that indicates houses are moving.
To be successful in a seller's market, you have to make house hunting your priority - not just something you might fit in here and there on the weekends, if you have nothing better to do. You need to treat house hunting as if it were your job, check listings regularly.
The way to be taken seriously is to show up with a mortgage pre-approval letter, plus a “proof of funds” form from your bank showing you have enough to cover the down payment. This way, the seller knows you can put your money where your mouth is.
Typically, when home buyers make an offer, they do so only with contingencies. Such as, buying the home if the inspection goes well or if they can secure financing. But in a seller's market, it would behoove you to drop one or both of these caveats to stand out to sellers, who would prefer as few hurdles on the way to closing as possible. Be sure to consult with your Realtor about the risk.
In many home-selling situations, buyers will make an offer below the seller's asking price, then negotiate upward from there. But in a seller's market, there is little to no room for price negotiations. In fact, if there are multiple bids, you could end up paying well over asking.
At the same time, you don’t want to blow your budget - remember, you'll still need to make those monthly mortgage payments. It’s a decision that you need to be comfortable making. Bid strong, but don’t overextend yourself financially.
In a seller's markets, it's not unusual to feel outpriced in your favorite neighborhood. But that may merely mean you need to start scouting else where. Like in an up – and - coming neighborhood nearby.
Sometimes properties will sit, even in a seller's market, because of a problem that’s scaring other buyers away. Yet those “flaws” might not be such a big deal to you. While such houses may not be ideal for everyone, when you find a house this way you can also cut down on the amount of competition you’ll face.