Tips for Negotiating in a Seller's Market
Be prepared and act quickly
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 moves 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 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.
Preparing the Homebuying Offer in a Seller's Market
When the market favors the seller, 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 in part 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 is not always the most important factor. But do not offer less than list price. Realize you may need to offer more than the amount the seller is asking.
- Earnest money deposit: A larger earnest money deposit might look very 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 is customary for the seller to move at closing, give them a few extra days to move. Another buyer probably won't think of this maneuver, and the seller will look more kindly upon an offer that lets them move at their leisure.
- Submit preapproval and proof of funds documentation: If your preapproval letter is from an out-of-area broker or lender, get a local preapproval instead. Match your preapproval 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 an offer from another agent who did not complete the offer the way the seller expects.
Think of it this way. Say a listing agent has two offers. One is exactly the offer the seller would like to sign. The other offer is not, and it would need a counteroffer from the seller to compensate. Should the listing agent prepare a counteroffer, or should the buyer's agent revise the offer?
In this situation, it is 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 That Seller's Market Showing
Don't be that buyer who wants to wait until the weekend to view a home in a seller's market. By the weekend, that home could be sold. Try to be one of the first showings. Sellers usually don't enjoy having buyers come through their homes at all hours of the day, so most would like to see their home sold quickly. If you write a good, fast, and clean offer, your chances of acceptance are far better than those of a buyer who is unprepared.