Wondering how to buy a house in a sellers market? It can seem like prices just go up and up while the inventory of houses on the market keeps getting slimmer. Here are 15 tips to help you buy in a sellers market so you can get into the right home for you and your family.
1. Get Crystal Clear On Your Criteria
The first step in buying a house in a brisk market is to make sure you know exactly what you’re looking for. Houses go fast in a sellers market, and there’s often not much time to waffle on whether the house meets your needs or not. Create a list of your must-haves and your nice-to-haves, and work with your Realtor to receive info on any new listings that meet your must-have criteria. Its good to know about homes as soon as possible, as some must-have criteria are common among home buyers for good reason!
At minimum, decide the minimum number of bedrooms you need, as well as the minimum number of bathrooms required. Put down any other must-haves on paper, including location requirements, features, amenities, and/or aesthetic style. Take special care to separate must-haves from nice-to-haves. Its hard to be too choosy in a seller’s market, and you may be some nice-to-haves that aren’t included or may have to be added to the property later on.
2. Get Ready To Show Sellers The Money
Having finances in order is key to buyer success in a seller’s market. Having your financing ready to go isn’t the most exciting part of the home search, but it can be a make-or-break item during closing. Cash is king, and having access to it during negotiations and closing is certainly an advantage.
The highest bargaining power tends to come from all-cash offers. But an all-cash offer is certainly not the norm among home-buyers! A pre-approval from a trusted mortgage lender can be a more reasonable way of showing sellers that you’re serious about buying (and able to buy). They need to know that your offer is backed up with real money, and won’t fall through at the last moment (after considerable effort from everyone involved).
Some buyers go as far as to have a cash deposit on hand in case the mortgage company’s appraisal comes in lower than the purchase price (a common scenerio when prices are rising in neighbourhoods). A less costly option is to get get a house-specific mortgage pre-approval letter from your lender that matches the purchase price offered (and date too, if possible).
3. Set Your Max House Price Budget
Set a maximum ceiling budget for your house purchase price. This may be set by the mortgage lender, but may also be lowered by the homeowner to a comfortable level of financing. Whatever your purchase price ceiling is, be clear about the budget number and make sure your Realtor knows your budgets and understands your financing needs.
In some cases, you may wish to set your automated MLS search slightly below your maximum budget, to leave some room in case a bidding war breaks out and the house sells over asking price. In situations where the price is of much greater importance than the particulars of the property, the search may be set with very limited parameters other than monetary budget requirements.
4. Get A Real Estate Agent With Years Of Local Experience
A great local Realtor is a must-have when buying in a sellers market. A good agent can help you get your finances and search criteria in place so you can be ready to take advantage of bidding on new listings when they hit the market. A good Realtor will have a pulse on the local market, and can help you confirm if the market is indeed a sellers market, and if so, how best to navigate it.
Some Realtors may know about potential houses for sale even before they hit the market. These are listings you’ll want to know about if they meet your criteria. You’ll also need to be prepared to make a prompt offer, which is another key reason to enlist the help of an experienced Realtor. There are many moving parts to a real estate purchase, and its key to have the right people on your team as a home buyer.
5. Get An Idea Of Current Days On Market
Do some research on the current number of days-on-market for local listings. In a sellers market, homes don’t remain listed for long! Have a look at the local data with your Realtor to see how long homes in your price range are lasting on the market on average. Are single family homes selling faster than condos and townhouses? What are the trends in terms of how long the types of houses you’re looking for remain on the market? Get an idea of what to expect (and expect the unexpected!).
6. Learn About The Bidding Process
Take some time to learn about the bidding process in your local jurisdiction before you’re actively involved in bidding. While putting in an offer on a house can be exhilarating, it can also be very stressful. Take the time to internalize the process long before you need to use those skills.
You may also wish to map out bidding strategies. Recall your maximum price ceiling budget and then consider different bidding situations. What will you do if there is a bidding war? How high will you go (your maximum price ceiling)? Are there any situations you anticipate? Thinking about these situations at the start of your search can result in a more informed (and less stressful) home search process.
7. Check Listings Daily
In a sellers market, buyers need to stay on top of new listings. Check local listings daily and be on the lookout for new for-sale signs around the neighbourhood and online.
If a new listing appears and fits your search parameters, arrange a showing as soon as possible. Don’t wait until the weekend or an open house. Most buyers like to see their houses sold quickly after listing, and they will be hoping for showings to be booked and offers to start coming in. And do your research before the showing. Know exactly what needs to be done if the showing goes well and you’re ready to put in an offer. Your Realtor can then be ready to put in a clear, quick, and clean offer that’s got a decent chance of success.
8. Go In With A Strong Offer Price
A strong offer price (relative to the asking price) is a must in a sellers market. In many sellers markets, houses will be going at close to asking price. In particularly brisk marketplaces, sellers may even be discarding any offers that come in below asking price. Work with an experienced Realtor to understand market expectations so you can present a reasonable offer.
The negotiation process can be exhausting. Show sellers you’re serious with a strong offer. A sellers market is not the time to low-ball a house you really want. Some buyers in hot markets will even add a few thousand dollars over asking price to start with, simply as a token of good faith to indication they’re serious about buying. Whatever your strategy, consider putting your best foot forward with a well-reasoned offer.
9. Make Your Offer As Clean As Possible
A great Realtor can help you craft a “clean” offer, which is attractive to the sellers but also reasonable for you as the buyer. Generally, a “clean” offer is free of major contingencies and conditions. Sellers see a “clean” offer as a deal that’s more likely to go through, as the buyer doesn’t have many excuses to back out of the contract.
Common conditions that complicate an offer includes making an offer contingent on the sale of your own current home, or other financial conditions out of the sellers control. They may also include concessions on costly items like closing costs. Work with your Realtor to understand the local market and available contingencies like home inspections, as well as additional options like underwritten loans.
10. Don’t Ask Them To Leave Things
In a sellers market, it’s generally best to create a concise offer rather than asking for certain pieces of furniture or appliances. If the seller has clearly indicated that select furniture/appliances can be sold with the house, that’s one story, but generally buyers refrain from asking for various non-significant items during the negotiation process.
11. Offer Exactly What The Seller Is Looking For
Write up your offer with your Realtor to reflect exactly what the sellers (and their Realtor) are looking for. Take the time up front to learn exactly what sort of offer the sellers prefer and make sure your offer is exactly that sort of offer. The sellers will be looking for an offer that matches their expectations in both price and contingencies. Make your offer the offer that the seller and the sellers realtor want.
12. Make Your Offer Stand Out To Sellers With A Personal Touch
Find a simple but memorable way to personalize your purchase offer. In a situation where the seller is considering multiple offers, all that information can start to blend together. A (short) offer letter, or a personal note/photo/video to the seller explaining why you’re the perfect buyer for the home, might set your offer apart from the others.
Keep things to the point, and emphasize that you will take good care of the house they’ve taken such good care of over the past years. Let them know why you really love the property (instead of telling them everything you’ll change when you move in). This can help them understand why they should sell it to you.
Help them imagine their beloved property in the future. An offer from a young family looking for a forever home in which to raise their kids can be a lot more compelling than an offer from a developer who may just knock the house down.
13. Offer Move-Out Date Flexibility To Sellers
If it sweetens your offer, consider adding move-out date flexibility to the sellers. Some buyers will rent the home back to the sellers after the sale has gone through, generally for a month or two while the sellers secure their new home. Or does offering a quick closing date suit the sellers better? Your Realtor can work with the sellers’ Realtor to ensure everyone is on the same page in terms of what works best in terms of move-out logistics.
14. Learn From Rejection
Learn from any offers you submit that are rejected by the sellers. Take the time with your Realtor to learn why your offer wasn’t picked, and how you can avoid that situation in the future. You’ll learn to anticipate the desires of sellers and more thoughtfully consider advice from real estate professionals. Expect that not all offers can be accepted, and that the real estate market is an ever-changing, dynamic place. Learning from rejected offers can help you make the perfect offer on a future property.
15. Practice Patience
Patience is a challenging but worthwhile virtue in the real estate purchase process. In most situations, the option remains open of waiting for the market to cool or an under-appreciated listing to appear. The market is ever-changing, with many inputs that affect it. In the future there may be higher interest rates, more homes being listed, or fewer people buying the type of home you’re looking for.
This article is meant for informational purposes only. This article is not a substitute for advice from a licensed real estate agent regarding your particular situation. Contact Tyler Rands for personalized advice specific to your situation.