Real estate sales set new all-time records in 2013 and we finally saw prices return to pre-recession peaks. Largely due to historically low interest rates in combination with an abundance of homes in or at risk of foreclosure (selling below market price), there was a surge of home sales that had never been seen before. The positive side of that is the economy in general is intertwined with the real estate market which means our economy is in better shape that it has been for some time. The unfortunate side effect is that the inventory of active listings took a significant hit and we’re now seeing historically low levels of homes for sale.
Naturally, when demand exceeds supply in real estate, a seller’s market is created which means, if you’re buying a home, you have a lot of competition. In a market like the one we’re faced with today, having the right set of expectations will give you an edge over the competition, so be prepared to include these tips in your home buying strategy.
- Have your financial ducks in a row. Have at least a pre-approval (or a funds verification letter from your bank if you’re paying cash) in hand to submit with any potential offer. A seller won’t take your bid seriously, especially in a multiple offer situation, without at least a pre-approval letter from a legitimate lender.
- Lowball offers don’t work in a seller’s market. You risk offending a seller with a lowball offer, sometimes to an extent that they won’t even counter your bid because they know something better will come along – and soon. Metrolist data shows that homes are selling for 98.4% of the asking price on average.
- Be prepared to offer more than asking price. If you absolutely fall in love with a home and you find yourself in a multiple offer situation, it’s very likely the bidding war will go north of the asking price. In this case, have a conversation with your real estate agent to be sure you don’t exceed a realistic market value.
- Time is of the essence. In a seller’s market, you don’t always have the luxury of waiting for the weekend to tour homes on the market or taking an evening to think about putting in an offer. Additionally, many real estate offices use software that uses electronic signatures which saves a lot of time when it comes to assembling required paperwork. A quick turnaround time on paperwork is crucial.
- Flexibility is required. From beginning to end you may be imposed upon for a variety of things including touring homes on weekdays, dropping what you’re doing to execute a document or paying over listing price. When it comes time for the inspection, you should temper your expectations on what the seller will be willing to fix because they know getting another offer from a less picky buyer is a real possibility. Just keep in mind other buyers are experiencing the exact same thing. Don’t forfeit a buying opportunity just because another buyer was more willing to be accommodating.
Buying a new home should be a fun and exciting process, but it’s very easy to get frustrated in a seller’s market. However, if you approach it with the right expectations, it just might end up in your favor and save you some stress and headaches!