So, what does a seller's market mean for buyers? Let's get into it! Because if you're not prepared in a seller's market, there's a good chance you're going to miss out on your dream home!
Since there are more buyers right now than there are properties for sale, we are in what we call a seller's market. And it's a hot one! If you are a buyer right now, depending on when you're reading this post, you might be buying in a seller's market as well. There are a lot of things that can happen in a market like this one that can impact you. Unfortunately, most of them are not in the buyer's favor. In a seller's market, buyers have fewer homes to choose from and so sellers really hold a lot more of the cards. There are some basic things to expect: more competition, higher prices, cash to be king, and things to move really fast. Because of these factors, I want you to be prepared to make quick decisions and be really strategic when you write an offer.
Buyer Tips in a Seller's Market
#1 Be a qualified buyer.
In a seller's market, you will need to be ready to compete. Since there are so many buyers, sellers don't want to waste their time with showings or offers from unqualified ones. Make sure you are ready to go with your pre-approval from your lender (or proof of cash funds if you're an all cash buyer) because you will want to submit these with your offer. In a competitive market, you might even need them to get an initial appointment to tour the property in the first place.
#2 Submit your highest and best offer.
Since there are so many buyers, you will often run into multiple offer situations. A buyer needs to be aggressive with the initial offer they submit. When you're coming up with your offer price, you don't want to go in with a mindset that you're starting at a bottom negotiation price, and then the sellers get to meet you and counter your offer at their bottom price, and you'll meet in the middle. No. Instead, you're going to want to go in with your highest and best right out of the gate, or you will very likely be outbid by someone else.
#3 Offer terms are very important.
An offer can be accepted or outbid on more grounds than just purchase price. For example, in a seller's market a smart buyer, in addition to coming in with their highest and best price, will also come in with their highest and best terms. They may offer to waive certain contingencies or pay for expenses that traditionally would come from the seller's side. These terms can help your offer stand out from the crowd.
#4 Be prepared for a low appraisal in a seller's market.
An appraisal is going to be required by your lender, and if it comes in low, you risk losing your financing if you're not able to make up the difference in cash. In seller's markets, it is very unlikely that the sellers will budge on the price, even if the home appraises low, so prepare to have to pay the difference. When you're starting your home search, you definitely want to budget for this because homes might be selling higher than they are able to appraise for. And they might be selling for higher than the list price!
#5 Make an all cash offer if possible.
All cash offers usually win in seller's markets. If you're not an all cash buyer, the more cash you can bring to the table, the better. An all cash offer means you're going to be purchasing a property without any mortgage or other financing. This is really attractive to sellers because they can usually close a lot faster, they know the sale isn't going to fall through due to your financing, and there's no appraisal needed by a lender. If there are no cash offers on the table offers with conventional loan borrowers are sometimes more attractive to sellers than offers with FHA, USDA, or VA borrowers, because those loan programs have more restrictions and may require a seller to make home repairs before closing.
Now go get that dream home! Stick around to learn more buyer tips and let us know in the comments – would you try and buy in a Seller's Market?