Apr 9, 2016
Buyers Guide: Surviving a Seller's Market
The house hunting process is challenging enough any way you slice it; shopping during a seller’s market is a whole other piece of pie. A sellers market is when the supply of homes is low, demand is high, and sellers are in control. If you’re not careful, you’ll be left holding your fork over an empty plate with nothing but crumbs left over from the other buyers that are now enjoying the feast. Sound painful? It is.
So it's best to bring your A-game, or don’t even bother showing up at all.
See below, for the surving a seller's market tips to help you stand out from the competition and get the edge.
Know the market signs
You may haved heard on social media or from the national media that you’re in a seller’s market, but how do you really know? While the market varies based on your location, you can look for these three major indicators:
- Houses are selling for more than asking price.
- You're frequently seeing or experiencing multiple offers on newly listed homes.
- Homes sell quickly, and inventory doesn’t hang around.
Search homes for sale in your area. If the majority of houses have been sitting on the market for more than six months, it’s not a seller’s market. But if only those uber luxury properties have been on the market for over a few months, that indicates houses are getting gobbled up quickly.
Be diligent and ready
To be successful in a seller’s market, you have to make house hunting a top priority—not just something you fit in here and there when it's convenient for you.
If you’re only looking now and then, you’re facing an uphill battle. Treat house hunting as if you were job hunting: Scour listings regularly and get set up on automatic hotsheet emails that send you the new listings that match your criteria. Also, be available to view a home asap when a possible fit comes up and be sure to follow up promptly if it's a solid prospect.
Be able to put it writing
Talk is cheap in hot markets—especially if it’s a buyer swearing up and down that he has plenty of money for a down payment or will have no problem getting a mortgage. The best way to be taken seriously is to show up with hard evidence in hand: a mortgage pre-approval letter, plus a “proof of funds” form from your bank showing you have enough to cover the down payment. That way, the seller knows you can put your money where your mouth is.
Drop the what-ifs
More often then not, when home buyers make an offer, they do so with several contingencies. For example, they’ll buy the home if the inspection goes well, appraisal matches offer price, or if they can secure mortgage financing. But in a seller’s market, it may be worth considering dropping one or two of these in order to stand out to sellers, who generally prefer as few hurdles on the way to closing as possible.
Make sure you understand the implications of waiving each contingency. For instance, if your credit history is spotless and you’re all but guaranteed to get a home loan, waiving the financing contingency may not be a huge deal. But it can be far riskier to waive the home inspection (what if the house has major flaws?) or a serious title issue (what if there’s a lien or back taxes on the home that now must be paid by you?). Consult with your Realtor®, too, about what’s worth the risk in your situation.
Don’t play hardball
In a typical home-selling scenario, buyers make an offer below the seller’s asking price, then negotiate upward from there. But in a seller’s market, often there is little to no room for price negotiations. In fact, if there are multiple offers, you could end up paying well over asking price. So how high should you go?
Don’t waste your time lowballing a seller. Always put in an aggressive offer. At the same time, you don’t want to blow your budget sky high—remember, you’ll still need to make those monthly mortgage payments.
Don't get too caught up in the hype and make sure it is a decision that you feel very comfortable making. Bid strong, but don’t overextend yourself financially.
Open up your search
In seller’s markets, it’s not uncommon to feel outpriced in your favorite neighborhood. But that may merely mean you need to start opening up your search—like, say, in an up-and-coming neighborhood nearby.
Sometimes properties sit, even in a seller’s market, because of a problem that is scaring other buyers away. Yet those “flaws” ( an extra 5-minute drive from school or some renovation work that needs to be done) might not be such a big deal to you. While such houses may not be ideal for all, “finding a house this way can also cut down on the amount of competition you will face.” And that means you hold a few more cards—a welcome change in a seller’s market.