No homebuyer wants to be caught off guard buying in a seller's market. A hot seller's market can make it very difficult, if not almost impossible, to buy the first home you want to buy.
Because homebuyers generally have very little interest in the real estate market when they are not buying a home, they don't always know how the market changes from one season to another, much less from month to month. It's one of the reasons that the most important thing you can do is trust your real estate agent to advise you on market conditions.
Markets can change almost overnight. When the market changes to a seller's market, your homebuying strategy needs to change with it. Here are tips that can help.
- Being a homebuyer in a seller's market can make it nearly impossible to purchase the first home you really want to buy, due to multiple offers.
- When preparing your offer, consider price and your earnest money deposit; don't request favors, but consider delaying your move-in date. A pre-approval letter can also help.
- You can ask your real estate agent to call the seller's agent to ask for any tips that might make your offer more attractive to the sellers.
- If you write a good, fast, and clean offer, your chances of acceptance are far better than those of a buyer who is unprepared.
Preparing an Offer in a Seller's Market
When you're buying a house in a hot market, time is of the essence. Multiple offers happen with more regularity in a seller's market than a buyer's market, because a seller's market is defined by low inventory and a surplus of homebuyers. A beautiful home that is priced well can attract more than one offer.
In a seller's market, you should always assume you're competing against several other offers.
Here are a few things to consider as you prepare your offer when buying in a seller's market:
- Price: The exact dollar figure isn't always the most important factor, but don't offer less than the list price. You may need to offer more than the amount the seller is asking.
- Earnest money deposit: Your earnest money deposit is the amount of money you submit with your offer. A larger earnest money deposit might look attractive to a seller weighing multiple offers. Ask your agent for advice on the deposit, then consider doubling or tripling that amount. You're going to pay it anyway at closing.
- Don't request favors: This is not the time to ask the seller to give you the refrigerator or washer and dryer, part with fixtures, or paint the front door.
- Delay buyer possession: If it's customary for the seller to move at closing, consider giving them a few extra days to move. The seller may look more kindly upon an offer that lets them move at their leisure.
- Submit your pre-approval letter and proof of funds documentation: If your pre-approval letter is from an out-of-area broker or lender, get a local pre-approval instead. Match your pre-approval letter to your sales price and date it the same day as your offer.
Ask Your Agent to Call the Listing Agent for Tips
Listing agents are often very busy. If your agent can save the listing agent some time by preparing the offer correctly, the listing agent might be more inclined to recommend your offer over one from another agent who did not complete the offer the way the seller expects.
Suppose a listing agent has two offers. One is exactly the offer the seller wants. The other offer is not, and it would need a counteroffer from the seller to compensate. With the second offer, should the listing agent prepare a counteroffer, or should the buyer's agent revise the offer?
In this situation, it's better for the buyer's agent to revise the offer. During the time it would take the listing agent to prepare a counter, send the counteroffer for a signature, and then deliver it to the buyer's agent, another full-price offer could arrive. If you want to be the first offer, the best offer, and the only offer the seller will accept, your bid needs to match the seller's expectations.
Your buyer's agent can find out what the seller wants by calling the listing agent or by reading the verbiage and instructions in the multiple listings service (MLS), which often has more information than what's available to you in the public buyer's listing.
Know what the seller is looking for from the start, and you'll increase your chances of hitting the mark with your offer.
Jump on Seller's Market Showings
Don't be the buyer who waits until the weekend to view a home in a seller's market. By the weekend, that home could be sold. Try to see the house as soon as possible. Sellers usually don't enjoy having buyers come through their homes at all hours of the day, and most would like to see their home sold quickly.
The Bottom Line
If you write a good, fast, and clean offer, your chances of acceptance are far better than those of a buyer who is unprepared. Find an experienced agent who can guide you through the ins and outs of your local market, follow their advice, and you'll be in good shape, even in a seller's market.