7 Tips for Buyers in a Seller’s Market
The housing market is dynamic and fluctuates based on job growth, population, land supply, and demand. When the demand for buying new homes exceeds the number of people selling, the market tips in favor of the seller. Real estate inventory is low, and sellers have a substantial advantage. They can increase property prices and are often able to get their home off the market quickly, sometimes even within days. While this can make the process of buying a home more difficult, as competition rises, it’s not impossible. To help, here are seven tips for buyers in a seller’s market.
1. Start Early
Regardless of where you currently live, if you want to get ahead in a seller’s market you need to start as soon as possible. Depending on the neighborhood, there may not be many homes that go up for sale to begin with. Once a home does hit the market, it’s not likely to stay for very long. While this can be frustrating for prospective home buyers, it doesn’t mean you won’t find anything. You just need to be patient and give yourself enough time to wait. Then, when something you like becomes available, you need to act as soon as possible.
For help with getting access to listings early, talk to a seasoned real estate agent. Real estate agents tend to see new listings before they’re put online, giving buyers more opportunities to find the perfect home. It’s also important that you try to keep your schedule open. When a viewing becomes available for a home you love, you need to be able to accommodate the showing into your schedule. The more flexible you are, the more likely you are to successfully visit available properties that you’re interested in.
2. Have All of Your Paperwork Ready
Due to the high level of competition in a seller’s market, it’s important that you have all of your paperwork ready ahead of time. This includes both your proof of funds for the down payment and a full mortgage pre-approval. The pre-approval process is the very first step in obtaining a home loan and helps you get a better understanding of your budget. This process takes about two weeks, so doing it ahead of time allows you to skip the wait and show your seriousness to sellers when making an offer. Before committing to a lender, shop around and see what your options are for interest rates. Lower interest rates can help strengthen your budget, so it’s worth spending some time on. Make sure that you have proof of income, verification of employment, employment history, documentation of personal assets, and a comprehensive list of any outstanding debts ready for your lender to expedite the process. The interest rate you receive from your pre-approval is good for about 60 to 90 days, so you’ll have plenty of time to look for a new home.
Having your pre-approval ready gives you an advantage over your competitors, as it allows you to act fast and can help show sellers that you’re serious about your offer.
Researching the pre-approval process is especially important for first-time homebuyers, as there are great options for low interest rates. Not only do low interest rates give you stronger buying power, but you’ll also lower your monthly mortgage premiums, allow you to pay off debts faster, and give you more power to invest. To help navigate this process and make yourself more appealing to sellers, work with a seasoned real estate agent.
3. Know What You Want, but Be Flexible
Many homebuyers begin browsing the market with their dream home wish list in hand. While it’s smart to know what you want, you should be flexible. Available properties in hot markets go fast and, while possible, it’s rare to find something that includes every single thing on your list. Instead, consider your ideal layout and look for homes with floorplans that match. This will give you the opportunity to renovate as you see fit without having to make major structural changes. When you approach the homebuying process with the knowledge that you’re going to undergo renovations, you may be able to find something that is below your budget. If you want to renovate immediately, take out the anticipated costs from your home buying budget. Otherwise, consider living in your home for a while before making any changes. When you live in your new home before renovating, you’ll be able to take your time, test out the space, and gain a stronger understanding of what you want.
One way to stand out from the competition is to look at homes that are slightly below your budget so you can make an attractive offer to the seller. This is a strong way to be considered in a hot market. It’s one of the reasons buyers shopping in their own budget bracket are competing with offers above the asking price.
4. Commit to the Process
Finding your new home is going to take some work. Commit to the process and treat it like a job. You need to prioritize it, otherwise you’re going to fall behind other buyers. Try to request showings or tours at the seller’s earliest convenience and move around your schedule to make it work. You may also want to write an offer letter to help make an emotional connection with the seller. While they’re not always taken into consideration, flattery tends to go a long way. It’s worth taking a few minutes to write and include with your offer.
5. Save Some Extra Cash
Gather up the extra cash that you’ll need for a down payment and various closing costs before you start your search. There are a lot of hidden fees when buying a home, so do your research and know what you need to have on hand. When you take the time to understand these fees, you’ll be more prepared to act when a home in your budget becomes available. This is also a good reason that it’s beneficial to look at homes slightly below your budget. Doing so will give you more financial flexibility to make a strong offer and have enough extra cash to cover all of the costs. A few additional fees to expect include school taxes for your new neighborhood, funding the escrow account, property taxes, moving costs, any maintenance or repair costs, renovations, utility bills, and mortgage closing costs.
Some mortgage closing costs to prepare for when buying a home include application fees, attorney fees, insurance, home inspections, property tax, real estate commission, and more. You can expect to pay between about 3% and 6% of the total purchase price, so make sure that you include this in your budget.
6. Consider Waving Contingencies
When you want to make an offer, take some time to think about potential deal breakers and things you don’t mind waving to make your offer stand out. Consider various contingencies to streamline the process. Some of these may include home inspection, appraisal, home insurance, financing, and clear title contingencies. By including these, you show a seller that you’re serious and ready to act, regardless of what you might find upon further inspection. An offer that includes contingencies is seen as “clean” and has a lower risk for problems in closing.
With that being said, don’t do anything you’re not comfortable with. If you waive a home inspection contingency, this means that you agree to buy the home regardless of any problems that may exist. While some may be obvious, structural damage or weaknesses can be very expensive and time-consuming to repair. Work with your real estate agent to determine which compromises you’re willing to make to become more attractive to the seller.
7. Keep Offers Strong
If you find your dream home, make sure that you’re able to make a strong offer. While it’s common for buyers to make offers that are slightly below the asking price, that luxury isn’t always an option in a hot market. Many homebuyers understand this, which is why they look for homes below their budget. When you’re able to make a higher offer, you’re more likely to be considered for the sale.
Navigating the homebuying process in a seller’s market can be complicated, but it’s not impossible. To increase your chance of finding a new home within your budget, work with the real estate agents at First Star Realty. With insider access to listings, you’ll be more likely to find a home in your desired price range and neighborhood. We aim to bring you peace of mind when buying a home in a seller’s market so you can feel secure and supported throughout the process. When you’re ready to find your dream home, regardless of the market status, contact the team of seasoned real estate professionals at First Star Realty. Call us today at 479-267-1600 or fill out a contact form on our website.