House hunting in a seller’s market can be tough. With not enough homes for sale, the challenge is for a buyer to make an offer that rises to the top and is accepted by a home seller. How do you do it? It’s all about being flexible and knowledgable. Here are six tips to bring your “A” game when buying a home in a seller’s market:
1. Work with a Real Estate Agent
When buying a home, it is advisable to have agent representation. This professional will first sit down with you to review the entire home-buying process so you know what to expect. Your agent will then search for homes that meet your criteria in areas you prefer. Your agent will know of homes coming onto the market and alert you to be prepared. He or she will also craft an offer to purchase that is strong and works in your best interest.
2. Know Your Budget
Understanding how much home you are qualified to purchase is very important – especially in a seller’s market. Getting pre-qualified for a mortgage loan is your first step in creating a home budget. Once you have this information, you can feel secure in making a strong offer on a home that includes documentation of this pre-approval.
3. Need vs Want – Type of Home and Location
Once you know how much you can spend on a home, the next things to determine are the kind of home and amenities needed. This list may include the number of bedrooms and baths, ranch-style home versus two story, type of floor plan or walkability factors. By keeping an open mind of what your major needs are, the more homes you can consider in a seller’s market. When creating your list, you need to consider: “I need” and “I wish I had”.
Remember, no home will be a “perfect place to live” – especially when searching in a seller’s market. Try to keep an open mind. If the home needs updating, will it work within your budget to make those changes? Can you make do with a floor plan that offers three bedrooms instead of four?
Location will also be a consideration. You may want a home located near your work, shopping or close to a highway. If your preferred neighborhood is out priced for your budget, you will need to start looking at other nearby areas. Widening your search geographically will cast a larger net of available homes on the market.
4. Be Ready to Act Fast
A key factor for home buyers in a seller’s market is to make a timely offer. You will need to stay on top of the daily changes in the market and when a new property is listed, be flexible with your schedule to view that home immediately and be prepared to make an offer.
5. Make a Strong Offer
In a seller’s market, think through your offer strategy. A low-ball offer will probably be dismissed right away. Don’t nickel and dime the seller. Too many contingencies can be a turn off to a seller. Think through the occupancy date and what would be appealing to that seller.
6. Be Prepared For a Bidding War
You may get caught in a bidding war for that dream home in a seller’s market. You do not want to overpay and will need to have a limit set of what you are willing to offer. Know the market and do your research on home values.
With multiple offers, the seller has his or her pick of which offer to accept, start a counteroffer process or reject all offers. The seller does not need to inform any potential buyers of the multiple offer situation. If the seller counteroffers, other offers may still come in for consideration. A seller does not have to respond to offers in the order received or reveal the status of other offers. With multiple offers, the seller has the upper hand and can use it to increase the price or improve the terms of sale.
In such a bidding war, you can either give your best offer and hope it is the strongest, or have an escalation clause that lets you bid up to a certain limit. If caught in a bidding war, you need to be available to your agent so your bid remains active.
If your offer is not accepted, do not panic. There will be other homes for sale. Don’t let your impatience to buy a home ruin your budget by offering too much for a home. Know your limits.