Monday, September 7, 2020

What to know about buying a home in a seller's market

Buying a home in a seller's market

Buying a home is part of the American Dream. Buying a home in a seller’s market, however, can make things a bit more challenging.

Homes go relatively quickly in a hot seller’s market, when there simply isn't a lot of inventory.

Unlike a buyer’s market, price isn’t always the main factor that determines who wins in multiple bidding scenarios.

 Other terms matter almost as much, if not more, than price.  “In a seller’s market, sellers generally assume they’ll get their asking price.”

Here are six things to know when buying a home in a seller's market:

No. 1: Home-buying competition is fierce

From a buyer’s perspective, not only do you have fewer choices in a sellers’ market, you’re likely to have bidding wars, all-cash buyers and quickly escalating prices.

In this type of environment, there are more buyers than there are homes available for sale. Less inventory breeds competition. Gone are the days of lowball offers. In a hot market, buyers need to be prepared to pay full price for a home, or sometimes pay over the asking price. But don't give up if you don’t  get the first home you bid on.

"It’s not unusual for buyers to submit three or four offers before finally submitting that 'winning' offer".

Even after your offer is officially accepted, it's best to hold the excitement until after closing.

No. 2: Get a great Realtor

           -   Rob and Anne-Marie Bouse 😉

The resources, experience and skills of a realtor are priceless when it comes to buying in a seller's market. We offer advice, education, networking and advocate and negotiate on your behalf.

Every detail matters. “Working with us in these types of hot markets can make all the difference and save you lots of time in the long run.”

"You definitely want your own agent who can guide you in the process, tell you how and what to offer,"

We may have a relationship with the listing agent of a home you're putting a bid on. It can make a big difference and get your name at the top of the list.

Listing agents are often more apt to go with a buyer whose real estate agent is reputable and can get the deal done efficiently, especially if the seller needs to turn around and purchase a home quickly after the sale.

We know how to set proper expectations according to the market they are in.

Preparing the buyer for a more difficult home-buying process than they imagined is also a crucial part of an agent's job.  The buyer needs us to tell you very bluntly what to expect and how to prepare for the harder parts of the process.

How do you know if you're in a seller’s market?

To see whether or not your local area is a seller’s market  look at the market absorption rate, which is usually measured by using at least six months’ worth of housing data.

This is done by counting the number of sold and pending sales in a particular neighborhood going back six months. Then, divide by six. You then count the number of active listings and divide the former result. If that number is great than six, it’s a buyer’s market. If it’s less than six, it’s a seller’s market.

No. 3: Preapproval letters are important

Pre-approval letters are key to the home-buying process.

Anyone can make an offer, but a true, bona-fide offer has either a pre-approval letter or proof of funds documentation.

If a seller is going to take their home off the market to accept your offer, pre-approval strength is key because if that deal falls through, you’re costing that seller tons of money. Not only will pre-approval letters help you compete, they will give you parameters for what you can buy.

In a seller's market, you're going to be competing with other buyers who are going after a small amount of inventory. Buyers who are pre-approved, working closely with a mortgage professional are the ones who are going to get that home.

We recommend including the contract, a mortgage preapproval letter, a copy of initial earnest money check, any signed disclosures and a personal note to the sellers if it's a multiple-offer situation.

No. 4: Start the mortgage loan process early

Once you’ve decided you're going to buy a house within the next year, talk to a mortgage professional.

Recent regulatory changes have pushed the length of the process in order to protect the buyer. This flies in the face of sellers asking them to move quickly like a cash buyer.

In addition, you'll need to provide lots of documentation, including but not limited to:

  • Thirty days of pay stubs
  • Two years of federal tax returns
  • Sixty days or a quarterly statement of all asset accounts - checking, savings, and investment accounts
  • Two years of W2s

There are many things that could prevent you from getting a mortgage on time -- a small ding on your credit, a new job or limited savings. Speaking to a mortgage professional in advance can help limit any last minute surprises, and help you understand and plan for buying in a seller's market.

No. 5: Be prepared to make a quick decision

Possibly the most difficult part of a seller's market is having to make rush decisions. Buying a home, is typically the largest investment you’ll ever make.

But moving quickly can mean the difference in whether or not you get that dream home.

Most buyers will have to decide upon a home in less than 10 minutes.

That's how long it usually takes to walk through a home, and the majority of purchasers in a seller's market make an offer after only seeing a home once.

One way to make those decisions easier is to figure out priorities ahead of time. For example, can you live without a garage, a fenced-in yard... ?

Anything buyers can do to prepare themselves to act quickly should be done before seeing the first house on the list.

No. 6: Be prepared to make strong, flexible offers

In a perfect world, you’ll be making an all-cash offer. For those who can’t, however,  it is still possible to compete.

Since many cash buyers want a discount for paying all cash, one way to get an edge is, by offering more money. It’s not always a lot of money that makes the difference. Sometimes it’s that extra thousand or two that separates your offer from the others.

Another strategy: Ask for a seller's preferred closing date. Your contract may very well be accepted simply because of your flexibility on timing.

Finally, make a strong offer.

In a competitive seller's market, your offer has to be complete. It has to be clean.

Clean offers mean no contingencies.

Your offer has to be competitive, without contingencies and you must be ready, willing, able and flexible.

We offer some additional insight on a unique and competitive offer in a hot market. If everyone else in your market is offering 10-day due-diligence periods, and you know it’s a great home, make your due-diligence just 5 days. Little things can make a big difference in a hot market.

"Don't let anything scare you about the buying process, that's why we are here to help and guide you through everything."



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