In our current seller’s market, homes are selling fast, and buyers must compete with each other in order to score a property. These market conditions often make buyers willing to spend more on a home than they would otherwise.
TIPS FOR BUYERS
Act fast: Whenever there’s a limited supply of houses on the market and a wealth of interested buyers, time is of the essence. If you find your dream home during a seller’s market, it will behoove you to act fast. Get preapproved for a loan in advance, so your financing is in order.
Know you’re at a disadvantage: A seller’s market is not the time to try to push contingencies, concessions, specific closing dates or repairs. If there are certain stipulations you want written into the contract, think hard about whether they’re worth losing the property over. Also, if you can make a cash offer, do it.
Be patient: If you find that you keep losing out on the homes you’re interested in, it’s crucial to be patient. Inexperienced buyers caught up in bidding wars will often offer more money than a home is actually worth – or they feel comfortable spending – in order to get the home they want.
Don’t settle: On the flip side, some buyers will end up making offers on homes they otherwise wouldn’t be interested in because they’re tired of losing out. Remember, buying any property is a huge investment and often a 30-year commitment. Don’t settle on a home just because it’s cheaper.
TIPS FOR SELLERS
Since sellers must compete with each other to attract buyers in a seller’s market, it’s helpful to know how to increase interest in your property.
Clean and organize: To begin, make sure that your home is in good condition and has been cleaned and organized before you market or show the property.
Price fairly: It helps to price your home fairly. If you set your asking price at or slightly below fair market value, you’re likely to attract more interested buyers. Some sellers choose to list their homes for slightly less than the assessed value in order to encourage a bidding war.
Carefully consider offers: Sellers are often so focused on choosing the highest offer that they fail to examine the financial strength of each buyer. Just because buyers say they’ll pay a certain amount for your home doesn’t guarantee they’ll actually be able to obtain those funds. Lenders will not allow buyers to borrow more than the assessed value of your home.
Preapproval vs prequalification: Preapproval requires that buyers’ finances and credit history are verified, making it far more likely they’ll ultimately be able to obtain a loan for a specific amount of money. Prequalification, on the other hand, is just an estimate of buyers’ finances.
Be aware of contingencies: Also, be on the lookout for offers that include contingencies. Offers that include stipulations, like mortgage contingencies, home sale contingencies, appraisal contingencies and inspection contingencies, enable buyers to back out of sales contracts if certain conditions aren’t met.
A Final Word
If you’re looking to buy a home, a seller’s market shouldn’t necessarily put you off, but it can help you determine your next steps. Instead of leaving your financing to the end, you should absolutely get preapproved as soon as possible, so you don’t lose out on what could be your dream home.