When you buy a home, you want everything to be perfect. You want the home of your dreams. You want a great location and you want an affordable price. So how do you get the best deals on a home in a seller’s market.
It may not be easy to get everything you want, but it will be especially difficult in a seller’s market.
A seller’s market occurs when there are a lot of people looking to buy homes and not enough supply to meet the demand. As a result, several buyers will bid on one property escalating the price to well over where it should be. Interested parties can easily get edged out and may be forced to settle for properties that are not ideal, or they may decide to hold off on making a purchase until the climate changes.
However, with the right strategies, a buyer may be able to get the home they really want at an affordable price. Read on for tips on getting the best deal on a home in a seller’s market.
Find out if You’re in Seller’s Market
Jasen Edwards is a real estate sales expert turned performance coach with more than 25 years in the industry. In addition to his other endeavors, he currently serves as the chair of the AgentAdvice.com Editorial Board and became a published author with the recent release of his book The Top Producer Life.
“Before you even start looking at homes, you will want to determine whether or not you are in a seller’s market. This will help you figure out what strategies you should be using when shopping around and making an offer.” Jasen Edwards
One way to tell what type of market you are in is to use a market absorption rate calculator. This tool will ask you how many homes were sold in a certain area in the past 12 months. It will then divide that number by 12 and further divide the number by the number of current listings in the area.
The end result gives you an idea of how many months it will take to sell the homes currently available in the neighborhood. If the number is low, you’re in a seller’s market.
We use the term Inventory or Monthly Inventory rather than absorption rate.
You can find the Monthly Inventory for Seattle and Snohomish County in our Monthly Real Estate Market Update Reports here:
The sales price to list price ratio will also give you an idea of whether you’re in a seller’s market. Numbers in the 90’s and above indicate a seller’s market. Lower ratios constitute a buyer’s market. If you are still unsure, it’s best to ask your real estate agent.
Make Your Best Offer Up Front
In a buyer’s market, you will want your offer to be as low as possible. When buyers have an advantage, they can use it to try and get a deal on a home.
In a seller’s market, you will want to go with the opposite strategy making a high offer from the get-go. The idea here is to get the seller to go with your offer immediately hence avoiding a bidding war that could make the price rise even higher.
Be Ready to Bid
Don’t be surprised if a bidding war occurs.
If you find your offer is being countered because other buyers are making offers, decide if you want to take the bait. It’s advisable to be prepared in advance by knowing what your highest offer will be.
Don’t let emotions get in the way by making an offer you can’t afford. Remember, you will be stuck with these payments for years to come. The last thing you want to do is get in over your head.
Be Prepared to Settle
When looking for a home, some are pickier than others. When it’s a seller’s market, you may not be able to afford to be picky.
Sure, you don’t want to settle for a home that you’re not happy with but forgoing walk-in closets and hardwood floors may be doable. Remember, you will have plenty of time to make upgrades in the future.
Offer to Pay Cash
Cash payments are appealing to sellers. It makes for faster closing, fewer closing costs and the seller won’t have to worry about the buyer backing out due to financing being denied. It also saves buyers on closing and interest costs.
Of course, not every buyer will have enough cash on hand to pay for the home but making a cash offer is likely to get you to the front of the line if there are other offers on the table.
Other Ways to Make the Seller’s Life Easier
Buying a home comes with several contingencies that make the sale more likely to fall through. If you waive some of these contingencies, the seller may prioritize you over other buyers. Here are some you may consider overlooking.
Inspection Contingency:
After an offer is accepted, the buyer has a certain amount of time to conduct a home inspection. During the inspection, the house will be looked at to determine its condition. If the inspection reveals a lot of damage, the buyer can walk away from the sale entirely or they may negotiate the price based on the repairs that are needed. Forgoing an inspection contingency means the buyer won’t walk away due to the condition of the house and that the seller won’t be responsible for repairs.
Appraisal:
A buyer may also back out of a sale if the home appraises for less than its sale price. Most lenders require an appraisal so it will not be possible to waive the appraisal unless you are paying cash.
Financing:
The financing contingency says that the sale is contingent on the buyer being able to secure financing within a set amount of time. It protects the buyer if they are unable to get a mortgage. If you are paying cash, you will not need a financing contingency. If you are not paying cash, your lender may require it.
Add a Strong Offer Letter
It’s customary for buyers to submit a letter when they make an offer. This helps to personalize the offer so the seller learns about who is buying the house. In some cases, the letter will be more important to the seller than the amount put on the table.
For instance, if you add something in your letter about how much the house will mean to you, the improvements you will make and the way you will beautify it and add to its potential, it could make all the difference to the buyer. You can also talk about why the home is perfect for you or your family. Or you can mention how you will be an asset to the community once you move in.
In todays’ age of technology, some people send videos instead of letters. This adds a personal touch letting the seller get a complete picture of who is buying their home.
Although money often speaks louder than words, some sellers will be drawn in by a buyer letter causing them to choose the offer over any other.
How Buyers Can Get the Best Deals on a Home in a Seller’s Market Summary
Buying a home in a seller’s market can be challenging, but the tips in this article will give you a leg up on other buyers.
Offering cash
Making a strong offer
Waiving contingencies
Providing a strong offer letter
Can make you stand out from other buyers.
Good luck getting into the home of your dreams.
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