How to be a buyer in a seller's market
If you were in the market to buy a house before spring of 2020, your experience would be very different than it is today. You spend a day visiting open houses to get an idea of what’s out there and to get an idea of what you want. You might have even been able to come up with a list of properties, go over the pros and cons of each and narrow them down like you’re on one of those home hunting shows.
And when you decided which house was the right one, you could submit an offer, negotiate terms, then high-five and hug your agent, as you prepared for in-person appraisals, walk-throughs and closings, shaking hands with everyone along the way.
As you certainly know, the pandemic has changed a lot. And one area that has changed the most is in the housing market.
What is a seller's market?
A seller's market is defined by a shortage of goods for sale and/or increased demand. With home prices continuing to increase, we are now in a seller’s market. If you’re looking to buy, you need to be prepared to move fast to find your dream home. Taking your time, the leisurely decision process, the weighing of the options—all gone for now.
A seller’s market is when supply is low and demand is high. The current housing inventory is as low as it’s been in years. Prices are at their highest national average since 2006. New construction is starting to make up for the imbalance, but it will be years until the houses are finished and relieve the problem of low supply.
Demand is high for a couple of reasons. Mortgage rates remain near historic lows. Millions of Americans have been spending more time at home and rethinking their needs because of that. It appears that some form of remote work is likely to stick around for a while. Some are opting for more space outside of the cities, while others are prioritizing home offices and areas for remote learning.
Buy like a Boy or Girl Scout: How to be prepared for a seller's market
So how do you prepare yourself to buy in a seller's market?
- Get pre-approved
- Get the money from mom and dad
- Don't waste time window shopping
- Be ready to pull the trigger
- Prepare for a bidding war
Get pre-approved
The last thing you want to do is find a home that you love, only to lose it to another bidder as you’re trying to figure out your financing. That’s why getting pre-approved is so important. And with how fast homes are being snapped up, (on average, properties remained on the market for only 17 days in May 2021) you likely won’t get your offer accepted without one these days.
A real pre-approval from Rate* is a great way to show a seller that you are ready to buy. Because our pre-approval includes underwriting, they will know you will likely be approved to buy the home. And a seller in seller's market won’t want to deal with the uncertainty if he or she has doubts about your offer and your ability to get final approval from your lender.
Get the money from mom and dad
It’s a fact of real estate life: many home purchases are made with help from parents and other family members. It’s a common situation that shouldn’t affect getting approved for a loan. However, if you need that money in order to buy the home, have it in your account before you make the offer.
It’s not necessary, but having that awkward conversation with your mom and dad after you find your home will slow you down, giving another buyer a chance to swoop in.
Don’t waste time window shopping
To many people, checking out homes that are for sale can be as much a fun hobby as it is an exercise in buying. But if you are serious about owning a home, now is not the time to be a looky-loo. That time spent visiting an open house with the price tag twice your budget is time that could be better spent finding a home you can actually afford before someone else does.
In fact, you can save yourself a lot of time by doing your homework on potential homes online. Checking out a few pics on a listing site may allow you to say no to a home and save yourself the trip to see it in person. Since some sellers are being extra cautious about who they let into their homes these days, this may be an even bigger timesaver than you realize.
Be ready to pull the trigger
Because there are so many homebuyers house hunting right now, homes are not lasting long on the market. Homes typically were swooped up in 17 days in May 2021, according to the National Association of Realtors. A year ago at that time, the average was 26 days on the market.
So if you see a home you like, be prepared to make the decision to put an offer in right away. It helps to have an honest and complete list of must-haves and deal-breakers. It also helps to know that you will most likely not get everything on your wish list.
Prepare for a bidding war
With so few homes for sale and so many buyers out there, you may need to mentally get ready for a difficult negotiation. You may even have to go over asking price, as 39% of all home sales are seeing multiple bidders push the sale prices into that high territory.
One tactic to help yourself get ready is to look for homes below your budget, so you know you’ll have some wiggle room to move your offer up if you have to.
Also, if you find a home you really love, make a bold statement to the seller and put a bid in above what they are asking for. That could end the bidding war before it can even begin.
It seems so trite to say, but before the pandemic, the world was a different place than it is now. And that’s more apparent in the housing market than in most other areas of our lives. But if there’s one thing we’ve learned this year, it’s how important home is. That’s why it’s so important to be prepared to buy in a seller's market.
*The Real Pre-approval (the "Approval") is contingent upon receipt of executed sales contract, an acceptable appraisal supporting value, valid hazard insurance policy, and a re-review of your financial condition. Rate, Inc. reserves the right to revoke this Real Approval at any time if there is a change in your financial condition or credit history which would impair your ability to repay this obligation and/or if any information contained your application is untrue, incomplete or inaccurate. Receipt of an application does not represent an approval for financing or interest rate guarantee. Not all applicants will be approved for financing. Restrictions may apply, contact Rate for current rates and for more information.