You have the down payment saved. You’ve got a solid job. Your credit score is excellent. Now you just need the home. But how do you find one in a white-hot market? Every house you tour seems to sell almost instantly.
Although it can be daunting to try to purchase a property in a raging real estate market, it can be done. Let’s take a look at some tips for buying in a seller’s market.
- A hot real estate market occurs when there is greater demand for housing than there are available homes.
- Preparing your best possible offer in advance can help you score a home.
- Don’t underestimate the value of a good real estate agent.
- Act quickly when you find a home that you like.
What Is a Seller’s Market?
A seller’s market occurs when there is more demand for homes than are available on the market. This results in fierce competition between buyers seeking to purchase from a limited pool of properties.
The market is cyclical, however. A buyer’s market is just the opposite; there are more properties for sale than there are interested buyers. Unlike a buyer’s market, a hot market moves quickly, which means you’ll need to move quickly, too.
Use Real Estate Agents to Your Advantage
Real estate agents can be invaluable when it comes time to buy a home. With a finger on the pulse of the market, real estate agents can show you properties you wouldn’t otherwise find. Even more important? Relationships.
“I highly recommend utilizing review sites like Yelp, Google, and Zillow to find yourself a local buyer’s agent that has a proven track record,” Jason Zaitz, a Silicon Valley real estate agent, told The Balance by email. “The highest-rated agents typically have great relationships with listing agents in the area. This can be the difference between you getting your offer accepted when you're competing against 20+ other buyers.”
Make Your Offers Competitive
According to the National Association of Realtors (NAR), 29% of homes sold above asking price in 2021. Such is the nature of a seller’s market.
Aside from working with a great real estate agent, there are other ways to stand out in the crowd of interested parties. Some sellers will appreciate personal letters explaining your situation and why you’d like to buy the home. Others may be interested in more money, in which case, an offer above the asking price could greatly help your case.
You also may want to consider waiving any contingencies in your offer, though proceed with caution on this front.
Contingencies within an offer allow you to step away from the property if you or the seller fail to meet expectations. Some common contingencies include the sale of your current home, the satisfactory completion of a home inspection, and your ability to secure financing.
Here are some tips for making your offers competitive:
- 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 do so. The seller may look more kindly on an offer that lets them move at their leisure.
- Submit your preapproval letter 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.
Act Quickly When You Like a Home
Have you heard of “timing the market?”
Don’t do it, Zaitz said. “Trying to ‘time the market’ is nearly impossible, in my experience. I've seen many buyers try to wait until there's a dip in the market and consequently get priced out within a year searching in a desirable area.”
This is especially true in a hot market. Homes are going quickly, which means you’ll need to act fast if there’s a property you like.
If you see that a home that appeals is listed, don’t wait until it’s convenient to go for a showing. In seller’s markets, your convenience often means the difference between catching a property and missing the boat entirely.
Due to the current situation, many properties have moved to virtual showings. These showings allow you to “tour” the home from the comfort of your couch. Take advantage of these to quickly determine whether a property suits your needs.
The Bottom Line
Any real estate market can be overwhelming to a buyer, especially if they’re inexperienced. Do yourself a favor and use these tips to be the most competitive you can in a hot market so you can score the home of your dreams.
Frequently Asked Questions (FAQs)
Why is renting sometimes better than buying in a seller’s market?
If you can stand to wait, renting could be a better option during a seller’s market. This is because the market is cyclical; it always eventually will turn into a buyer’s market.
How long does it take to buy a house?
According to mortgage-origination fintech company Ellie Mae’s Origination Insight Report, it took an average of 58 days to close on a house in January 2021, although that had declined to an average of 46 days by November 2021.
How hot is the real estate market?
A key indicator of a hot real estate market is the presence of multiple-offer scenarios for many properties, Zaitz said.