The real estate seller’s market is red hot right now, which is impacting buyers. Without a doubt, the COVID-19 pandemic has changed the housing market in ways never experienced. Many buyers have abstained from physical walk-throughs and are now making purchases via Facetime or Zoom. Houses are being snagged up as fast as they hit the market – no doubt resulting from the record low mortgage rates. Buying real estate in a seller’s market is not for the faint of heart – it has become a challenge, and buyers need to prepare themselves for a battle to buy prime real estate. In this article, we will explore tips on buying real estate in the highly competitive seller’s market.
Paying More for Real Estate in a Seller’s Market
Don’t be shocked if you are faced with the genuine possibility of a bidding war for much-sought-after homes. With a low inventory, sellers are not only asking for higher prices, but they are often expecting to receive more than the asking price. Buyers are not going to score a discount home in a seller’s market. It’s going to become hard to lock in a deal without another would-be buyer making a higher offer to make it to the finish line first.
Buyers must prepare themselves for multiple offers on a single home. In addition, homes will sell well over the asking price in most locations – a sad reality of a booming seller’s market.
Real Estate Buying Strategies in a Competitive Market
As a buyer in a seller’s market, you will have to accept the fact that you aren’t going to score a deal or get a discount. You might end up purchasing a home that needs significant repairs.
A couple of years ago, you could have demanded that any repairs found on inspection be taken care of by the seller before going to escrow. Still, nowadays, buyers face the sad reality that they’ll often have to fork out the money for the needed repairs. Without a doubt, the lack of housing inventory has become a driving force, and the rules have changed. Things are no longer a level playing field.
The Necessity of Mortgage Preapproval
Don’t even start your real estate search without first getting a mortgage pre approval. Preapproval from a financial institution shows that you have gone the extra step to have a lender look at your finances and verify your creditworthiness. Honestly, most real estate agents won’t even show you a home without a bank letter, and making an offer without preapproval has become impossible.
Stay Under Budget
Look for homes under your budget to bid up when you find one that you like. If you are only looking at houses on top of your budget, you can expect someone to outbid you quickly. Pick homes below your spending limit, so you have a cushion to bid up. A letter of preapproval will clearly outline the amount that has been pre-approved by the lender. You want to stay well under that number and then bid upward as needed.
Consider Time When Buying Real Estate in a Booming Market
Are you borrowing the money for your down payment? Most lenders want to make sure that the down payment has been in your bank account for at least three months. If the money is not seasoned in the account, then lending delays can happen as the lender balks at giving you the loan. If you cannot close on the seller’s desired date, then the whole deal can quickly fall apart, and another buyer scores your dream home. Of course, you are chomping at the bit to buy a house, but sometimes you need to give yourself a little extra time, so you don’t lose out in the long run.
Pick the Best Real Estate Agent in a Seller’s Market
You need a truly outstanding real estate agent to compete in a seller’s market. They must have negotiation skills and a solid understanding of the area. A seasoned real estate agent needs excellent connections with other agents, home inspectors, and lenders, so you know you’re getting a good deal when you find a property you like.
Before hiring an agent, you’ll want to check their reviews, talk to people who have worked with them in the past, and meet with the agent one-on-one to discover if you both click. Always find out how many properties the real estate agent sold last year to get a window into their success. You don’t want to work with a green agent in a seller’s market, or it will end up costing you.
Make a List of Acceptable Homes
As a home buyer in a seller’s market, the sad fact is that you probably won’t score the home you want. You must make a concrete list of several homes that you find acceptable. Do not fixate on a single property, or you’ll only end up disappointed. Also, if you ‘fall in love with a particular property, you might end up making a wrong financial decision because you’ll bid way over the asking price or shoulder the responsibility of high home repair costs. Undoubtedly, you must avoid becoming emotionally attached to one home.
Be Willing to Consider Contingencies
In some cases, it’s not just about the asking price of the home. Instead, a seller might want contingencies such as a rent-back, giving the seller enough time to transition to their next house, or an early/late close. When buying real estate in a seller’s market, you must prepare yourself for contingencies and offer leniency to make the seller happy.
Expanding Your Search Criteria
The most sought-after neighborhoods are going to sport the highest price tags. At this point, certain areas of the country are booming such as Tampa Florida, Austin Texas, and the metro area of Nashville, Tennessee. Sometimes expanding your search radius will help you find an acceptable home for less money. Also, it would be best if you considered other factors. Do you have a fenced-in yard or a fireplace? Certain ‘must-haves’ might make it more difficult and more challenging.
Buying real estate in a seller’s market has its hurdles. However, staying on your toes and educating yourself about the area’s real estate will help you land an acceptable home. You’ll have to bring your a-game to the table to contend in the red hot housing market and beyond.