The home seller’s market boils down to a simple matter of economics. When the list price is low and demand is high, some homes end up on the market for only hours with competitive bidding.
According to the National Association of Realtors, Home prices have been going up for 50 consecutive months.
Still, it is possible to buy a home amid a seller’s market, even if it is admittedly more complicated. You’ll do more than okay if you stick with these eight tips:
Determine You’re in a Seller’s Market
When the market has shifted in this direction, it’s best to adopt some buying strategy. Our agents can help make your calculations easy.
A market absorption rate calculator can tell you how many months it will take to sell all the remaining homes in a given area.
The calculator first asks you how many homes were sold in the past 12 months, it then divides that number by 12, and again divides the frequency by the number of current listings. A six-month supply is considered a balanced market.
Make Your Best Offer First
In a strong seller’s market, you need to make a list price offer quickly to prevent competitive interest.
Most agents are happy to get the seller their price and do not want to make an effort to get $10,000 more when their compensation is only $300. As a buyer, you can use this to your advantage.
Be Ready to Bid
If your initial offer doesn’t get any attention, your next step is to increase the offer and be prepared for it not to be your final one.
Add an escalation clause of 2-3 percent more than the highest bid received. This expresses a strong desire for the property and a willingness to pay the most.
This method is often in a slow market when buyers want the property but not at the seller’s price. If another buyer comes in, the buyer’s lower offer includes a 2 percent escalation.
Buyers have to put their best offer on the table. Owners are going to see three, five, sometimes up to 12 offers all at once. They don’t need to write a counter if they can select one of the best offers. So as a buyer, you better hope your offer is the most impressive on the first go.
Show your seller how serious you are by offering them more physical cash than they’d usually see. You have withdrawn the amount to show interest. If a high earnest money deposit is $20,000 in your area, then increase it by $10,000.
Offer Non-Price Factors
As a buyer in a competitive market, you have to consider waiving the financing contingency, limiting inspection to three to five days, and placing more significant earnest money deposits to provide non-price consideration.
In some hot markets, the property may not evaluate for the highest offer, so keep in mind the loan may not be approved. The more contingencies a buyer has in their proposal, the more risk there is for a seller. If that’s the case, it’s more likely a seller will reject them in a seller’s market.
A home inspection is vital for a buyer, but some buyers will neglect it, believing it will help improve their offer.
You can help yourself by being flexible with dates and deadlines in a contract by giving the seller extra time to move out.
Have Money for a Low Evaluation
High house prices can lead to home evaluation that doesn’t climb as fast, leaving lenders less likely to fund the loan. We suggest that you set money aside and pay the difference between a contracted purchase price and the evaluation.