Tips on Surviving in a Seller’s Market
So you’ve decided to buy a home. You’ve started in on the home buying process. But something’s wrong. There aren’t as many houses as you thought there would be, and the ones that are available are off the market faster than you can make an offer. Sometimes before you even have the opportunity to walk through them. What does that mean? You’re in the middle of a seller’s market. What is a seller’s market? It’s when supply of homes is low, demand is high, and sellers are in control.
So what are the signs?
There are two major red flags when the market favors the seller. First of all, the houses on the market are moving fast—inventory doesn’t stay on the market for long. Second, houses are selling much higher than asking prices. Have the majority of houses been sitting on the market for months on end? Then it’s not a seller’s market. If the most expensive and luxurious homes are left, then it’s probably a seller’s market.
In a seller’s market you need a competitive edge. Because the seller has the power, they can feel comfortable enough with their prospects to reject bids without the fear of leaving money on the table. You need to bring your A-game. Here’s how.
Commit to the chase.
Make your house hunt a priority. Treat it like a job hunt. Don’t just float through open houses on the weekends—it’s sure to be a waste of your time, especially if houses are moving fast. Reshuffle your priorities to match the pace of the market, especially if you’re sure that you want to buy now.
Talk is cheap.
Show up with paperwork, not with promises. Come with proof that you can put money down and get a mortgage. Preferably, show up with a proof-of-funds form from your bank that proves that you have enough money to cover the down payment and a mortgage pre-approval letter. Make sure the seller knows that you’ll put your money where your mouth is.
Take the plunge.
Abandon what-ifs. Usually buyers make offers that include contingencies. For example, if the home inspection turns up serious issues, the buyer can back out. In a seller’s market, you need to be ready to take the plunge—drop as many of the contingencies as possible so that there are as few hurdles as possible.
Don’t haggle too much.
In a seller’s market, there is seldom room for price negotiation. The seller isn’t concerned—they know that more offers will come if yours doesn’t work out. If there are multiple bids, the price could go well over asking. Don’t waste your time low balling—put in an aggressive offer. Keep your budget in mind, but remember that the seller is in control.
Don’t get attached to one neighborhood.
You love the neighborhood you’re looking in, but you feel like you’ve been priced out. It’s not uncommon in a seller’s market. Don’t get stuck on something you can’t afford, it’s a waste of your time and it can be heartbreaking. Start looking in up-and-coming neighborhoods nearby—this may eliminate some of the competitions for reasons that may not be an issue for you, like distance to school districts or extra renovation work. The decrease in demand move some of the market power from the seller to the buyer.
A seller’s market is hard to navigate—you don’t have much room for hesitation or negotiation, and inventory moves fast. That means you need to do whatever it takes to get an edge.
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