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Despite the recent pandemic, the real estate market has been surging. This is likely due to the low interest rates which look to be standing at or below 3%. From people being locked down to the need to relocate, a few factors are contributing to a seller’s market in 2020. Selling a home in a seller’s market is a great position.
As a buyer, how can you win in this climate? Keep reading to find out tips and tricks when it comes to snagging your dream home to a reasonable price.
What Is a Seller’s Market?
To understand how a buyer can win, you first need to understand exactly what a seller’s market is. The basic definition comes down to supply and demand. When more people are looking to buy than there are houses, it creates a seller’s market.
Competition for homes is fierce and sellers will have the upper hand when it comes down to negotiating. They will likely receive multiple offers above asking price.
Tips for Buyers in a Seller’s Market
It’s still possible for a buyer to win! Here are the best tips for getting there.
1. Get a Responsive Realtor
Buying a home is a stressful process that requires a lot of attention. There are so many different factors that go into home buying. It’s always best to have someone who can guide you through smoothly.
Their experience and advice could save the day. Especially if you are a first-time buyer, securing the best agent for you is the key to success. Do your research when choosing who to go with. When in doubt, choose an experienced realtor and one who will act fast.
A good test for whether you’ve identified the right realtor is:
- Do they respond to you within an hour or two?
- Do they call you back, instead of email you?
- Do they take your calls on weekends and evenings?
- Have they sold other properties in your market in recent months?
2. Find a Recommended Realtor
It’s also smart to choose a realtor who comes highly recommended by others. The internet is a great source of information that provides other people’s real accounts of how they perceived their service. Ask people you know as well!
You’re going to spend a fair amount of time with your realtor, so it matters how much you like and trust them.
Plus, your agent should be a trusted advisor, because they will act as a liaison between you and your mortgage broker, the seller’s real estate agent, and the title company. Choosing a good one is really, really important.
The best part about being a buyer is that you don’t have to pay your realtor directly. The seller pays for their services from their sale proceeds.
3. Get Pre-Approved
When that perfect home comes into your sight, you will want to act fast. In a seller’s market, homes can be gone in a matter of hours.
That means you need to know what you are approved for when it comes to a loan. That is, what’s the max price you can offer based on your cash in hand and the loan for which your mortage broker approved you.
A pre-approval letter only takes about 24 hours to secure. Getting the pre-approval will show sellers that you are serious and capable when it comes to purchasing their home.
4. Be Lightening Fast
When a property you like hits the market, you’ll want to go view it within hours and submit your offer immediately afterward.
This means that if a property gets listed at 10am, you should try to go see it within a few hours and get your offer in before the close of business. Why? Because by 5pm your competition will be getting off work and get themselves organized to view the property.
By the next morning, some of them will likely be submitting competing offers.
If you can get your offer in first, you’ll have a chance of getting it approved before other—potentially more competitive—offers get submitted.
5. Craft Curated Offer Letters
Including a personal letter to the sellers can make a difference. When you bring emotion and relativity into the mix, people are more likely to consider your offer. This means you’re not only telling them that you want to purchase their home but why you want to.
If you noticed that you have something in common, mention it. You can also compliment them. Flattery goes a long way! You can ask your agent or do some search about these real estate offer letters that are becoming ever more popular.
6. Up Your Earnest Money
Earnest money is known as good faith money or money that you put down to show how serious you are about purchasing a property.
This is a layer of protection for the seller if the buyer were to decide not to go through with the purchase.
Unless there is an issue with an inspection or appraisal, the buyer is not allowed to opt-out of the transaction. That means the earnest money put down would go to the seller. As long as the transaction completes, the money will go toward the buyer’s mortgage.
Sellers prefer people who put down larger amounts of earnest money because that ensures a bigger safety net. This could play a big role in a competitive market.
7. Negotiation Skills
Agents will come in handy for this one. There are several ways to negotiate competitively. Here are some examples:
- Offer a fair price to start
- Use un-even numbers
- Move in small increments
Beyond negotiation, eliminating financial contingencies and issues can ensure that you are going to be able to follow through with a purchase. This looks great to sellers. Although this option is an unlikely one, it is something worth considering.
8. Include an Escalation Clause
This clause helps make sure that you get a chance at bidding the highest. It states that if the seller gets an offer that is higher than your initial offer, then you are willing to offer a higher price. Most of the time this amount is predetermined.
This gives you more opportunities. You’ll be less likely to be out-bid.
9. Avoid a Home Sale Contingency
A home sale contingency is a real estate clause that makes the purchase of the home in question contingent on the sale of the buyer’s current home. Seller’s hate this clause for the reason that it introduces a variable that is totally outside their control.
They don’t know anything about the condition or desirability of your current home, nor do they know if you’re committed to selling it. Lastly, they can’t know if you have a savvy realtor who has priced your home right, is marketing it effectively, and is following up with buyer leads in a timely and professional manner.
Because this contingency can result in termination the of the purchase contract, it’s unlikely that your seller will agree to it if they have other offers in hand.
10. The Fewer Contingencies, the Better
Contingencies serve as protection for the buyer. Sellers want there to be fewer ways for buyers to back out. Therefore, eliminating some contingencies will put a seller more at ease and make them more likely to accept your offer.
Some possible contingencies to waive could include the home inspection, flood inspection, pest or termite inspection, appraisal, or mortgage contingency.
Removing hurdles for the seller is one way of sweetening the deal.
11. Consider an “Ugly Duckling”
While it’s a bit of a hassle to acquire fixer upper properties when you could buy one that is move-in ready, in a seller’s market it sometimes pays to look for the “ugly duckling.”
Meaning, if you can find a home that’s in need of simple cosmetic repairs, then you’ll probably have less competition. Often, simple fixes—like light fixtures, paint or landscaping—will be off-putting to other buyers who are busy or disinterested in being handy.
However, if you can do these fixes for relatively little money, then it just might be worth putting in an offer.
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Of course, use your best judgement and common sense here!
12. Make Compromises
Stay flexible and be willing to compromise. You shouldn’t make large requests such as a new deck or for them to completely repaint the exterior. This adds more work and money that the seller will have to shell out.
No matter what position you are in, buying and selling a home come with their own stresses. Allowing the sellers to move out when they need to and giving them time to consider an offer can help you win.
If a seller needs to stay in the home for a longer amount of time, buyers can secure a rent-back agreement. The home is rented to them until they move out.
Securing Your Dream Home in a Seller’s Market
Navigating the real estate world can be challenging. Should you buy a house in a seller’s market? Absolutely, as long as the figures and terms make sense!
If you miss out on one house, there will be another. Hopefully, that won’t happen with these tips and tricks.
What questions do you have about buying a home in a seller’s market? Ask them below.
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