There’s no doubt that things are tough for buyers at the moment. Home sellers have the upper hand. Demand is high, houses are in short supply and prices are rising. Fortunately, we’re here to help with a great resource on how to buy a home in a seller’s market.
A seller’s market like this makes purchasing a new home challenging. In most cases, you have to pay the asking price (or more). Discounts are rare. You’ll need an open mind, the right offer, the right loan type, and a little bit of personality to make it work.
Let’s take a look at some of the strategies you can adopt if you find yourself in a seller’s market. These are designed to give you an edge in negotiations and, hopefully, find some better deals. Remember, even if you can’t have the precise house that you want, there are still many bargains to be had.
What is a Seller’s Market?
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A seller’s market is one that favors sellers – that much you probably know already. But definitions are sometimes a little more technical than that.
Strictly speaking, in a seller’s market, demand outstrips supply. There are more people looking for homes to purchase than there are those willing to sell them.
When this happens, homes sell fast. Estate agents and owners begin to twig, getting the impression that they might be able to raise prices and still sell their properties. During this phase, home prices rise faster than their historical average.
Buyers may also become embroiled in “bidding wars” with each other. A buyer, for instance, might offer an existing owner the asking price for their home, say $200,000. Then another buyer might come in right behind them and offer $205,000 and so on.
8 Strategies for Buying a Home in a Seller’s Market
Ideally, you want to avoid costly bidding wars or paying over the asking price for a home. Consider some of the strategies you can use to keep your bid price down in a seller’s market.
Keep an Open Mind
Many buyers believe that the house that they want is the house that they absolutely must-have. Emotion trumps logic and the actual price of the property doesn’t seem to matter a great deal.
If you can, you’ll want to avoid this type of thinking. Yes, there will be homes that you naturally love, but you don’t necessarily have to go with them, just because they seem like the right ones.
Instead, keep an open mind. Always consider the price in your decision-making. The last thing you want is to move into a house with an unaffordable mortgage. That could set you back years. Use our mortgage calculator to find how much house you can afford.
Expand Your Home Search
Many people have their heart set on a particular area. But in seller’s markets, these tend to be the worst in terms of prices. Popular neighborhoods see rapid price inflation as everyone wants to jump on the bandwagon.
Consider expanding your home search to new areas or different parts of town. You might find that if you look further afield, the market isn’t as hot. A great real estate agent can help.
Don’t Make Lowball Offers
In a seller’s market, making lowball offers won’t get you very far. You probably won’t get any response at all from the owner.
The best strategy is to give the current owner an appropriate offer. You want it to be high enough to tempt them, but not so high that you wind up being out of pocket.
Try offering just below the asking price first. If the seller refuses but doesn’t have a counteroffer, try going slightly above the asking price.
Skip the Mortgage Contingency
A mortgage contingency is a clause in property transactions that gives home buyers time to secure a mortgage for the home. It sounds good for buyers because they can walk away from a transaction without legal repercussions if they cannot secure the loan. But for sellers, it’s not ideal. They want buyers who aren’t going to bail on them for financial reasons. What they care about is receiving the money.
Avoid mortgage contingencies. Instead, show the seller your commitment. It’ll differentiate you from other buyers.
Make an All Cash Offer if You Can
For the same reason, you should make an all-cash offer if you can. Remember, you can always refinance your new property at a later date.
Get Preapproved if You Can’t Pay Cash
If paying cash isn’t an option for you, then you’ll want to get preapproved. With preapproval, you can prove to the seller that you have a mortgage ready and waiting to go. From their perspective, it’s exactly the same as if you had cash in hand. They receive a payment from the bank and you take on the mortgage liability.
Personalize Your Offer
Homeowners are emotional people, just like everyone else. Therefore, for many, the sale of their properties isn’t solely a crude financial decision. Instead, they will sometimes take buyer characteristics into account.
For instance, they might be more willing to sell their home to a family. Or they may consider you if you have a certain hobby and they believe that their home will be put to good use when they are gone. Write the homeowner a letter explaining who you are and why you’re the best buyer for their home.
Get to know the buyer and think about what they would like the next owners of their property to be like. Then leverage it.
Consider Offering More Than Asking
Lastly, you may want to consider offering more than the asking price. In some situations, this can help avoid a bidding war by getting the property off the market quickly.
Make the Most of the Market with Omni Horizon
The real estate market is changing and you need a strategic partner ready to look ahead of the curve. Omni Horizon Real Estate sees what’s ahead and is ready to go to work for you no matter whether you are buying or selling a home.
The benefits of working with a skilled real estate agent include:
- Saving you time and effort
- Access to multiple listing services
- Finding the best deals
- Understanding pricing dynamics in local areas
- Broad knowledge of the market (and what you can get for your money)
- Understanding the property buying process
Contact Omni Horizon Real Estate today and let’s work together to help you find the home of your dreams.
