Sept. 9, 2019
Although you might not notice it while you're attending all those Sunday afternoon open houses, there are some serious economic forces in play when it comes to your local real estate market. Basic laws of supply and demand are in full force, and if there are a lot of houses up for sale in the neighborhood you want to buy in, you're in luck!
The extra supply drives the competition down — along with the prices. This is what's known as a buyer's market, since the buyers have more power on their side to negotiate a deal they like.
The flip side to that is the dreaded seller's market. This typically happens when not many people are selling homes in a given area, which reduces inventory and forces buyers into bidding wars. All that competition for just a few properties can really jackup the prices. That's good news for sellers, of course, but not so much for you if you're trying to get into your dream home.
This is not to say that you should sit out of a seller's market and give up on buying a house — life's too short for that! Instead,focus on avoiding the mistakes that can tank a deal — or send your seller straight into the arms of a more decisive buyer. Make sure not to commit these five mortal sins of buying a house in a seller's market.
1. Not Getting Pre-approved for Your Mortgage
When it comes to buying a home in a seller's market, speed is the name of the game. After all, why should a seller wait for you to get your ducks in a row when other buyers have already done their homework?
To make your offer more attractive, make sure you're pre-approved for your loan — and that you have the paperwork to prove it. Is it a pain to gather all that paperwork to hand over to your loan officer? Yes. But it's better to do it ahead of time so you're ready to make an offer right away when you finally find the house you want
- Pro Tip: Getting pre-approved is more impressive than just being pre-qualified, so make sure you talk to your lender about going the extra mile right away.
2. Being Indecisive
No one's saying you should blindly rush into a purchase as big as this one without asking some questions, but you don't have all the time in the world to decide when it comes to working in a seller's market. One of the best ways you can be ready to leap when you find the home you want is to be very clear in your mind about which features are must-haves and which ones you're willing to compromise on. Is the neighborhood more important, or is it those granite countertops? Work through your wish list now so you don't have to spend days agonizing over a pros and cons list — that house could well be off the market by the time you decide if you're not sure what you want.
3. Low-balling Your Offer
It's always a good idea to leave some room to negotiate, but putting in an offer that's well below the asking price in hopes of getting a bargain could backfire. You'll put yourself at a disadvantage if there are multiple offers on the same house, and you run the risk of insulting the sellers — or at the very least, letting them think you're not really serious. Talk to your real estate agent about what's going on in the market right now to get a sense of how to position your offer. Their expertise will be crucial in making a strong bid that gets noticed
4. Being Unprepared for a Bidding War
If the market is really hot where you're hoping to live, conditions could be ripe for all-out bidding wars over the best properties. This is where things get tricky. You want to put in your best offer in hopes of impressing the seller and rising above the competition in the first place, but the seller could counter — with you and with other buyers. Savvy sellers know that the competition only helps them get more money for their property, so they could easily work to play you off of other hopeful buyers. To avoid running out of room in your budget right away, it can be helpful to "shop low" — that is, to purposely look at houses that are priced below your maximum possible price. This will allow you to open with a strong bid and leave you room to increase your offer if need be.
5. Not Choosing a Qualified Real Estate Agent
Negotiating a great price on a house during a seller's market takes savvy and finesse. You'll need someone who knows the market inside and out, and it's also a good idea to work with a Realtor who is available at all hours to work quickly to make sure your favorite house doesn't slip through your fingers. When you're ready to start shopping for your new home, give us a call! We're standing by with all the expertise you need to make the move into homeownership — even during a chaotic seller's market.