A seller’s market arises when demand exceeds supply. In other words, there are many interested buyers, but the real estate inventory is low. Since there are fewer homes available, sellers are at an advantage. In a seller’s market, homes sell faster, 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. Therefore, sellers can raise their asking prices. Furthermore, the increased interest means that buyers rarely have the power to negotiate and are more willing to accept properties as is. Due to the shortage of housing, these conditions often lead to bidding wars. During bidding wars, buyers will make competing offers and drive up the price, typically above what the seller initially asked for. Whenever there’s a limited supply of houses on the market and a wealth of interested buyers, time is of the essence. Act Fast If you find your dream home during a seller’s market, it will behoove you to act fast. If you hem and haw over a house you know you want to buy, you may find that it’s no longer available by the time you wish to make an offer. Understand how to get your initial mortgage approval ahead of time, so your financing is in order when you need it.What Happens In A Seller’s Market?
Tips For Buyers
Know You’re At A Disadvantage
When it comes to making an offer, keep in mind that you’re the one at a disadvantage. A seller’s market is not the time to try to push contingencies, concessions, specific closing dates or repairs. Focus on what’s most important to you. If there are certain stipulations you want written into the contract, think hard about whether they’re worth losing the property over. If you can make an all-cash offer, you should. Sellers prefer buyers who are willing to buy the house with cash because they don’t have to worry about the deal falling through due to issues with financing.
Be Patient
If you find that you keep losing out on the homes you’re interested in, it’s crucial to be patient and not get discouraged. Many buyers end up suffering during a seller’s market because they get frustrated. 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. That’s always a mistake.
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 to a mortgage payment. Don’t settle on a home just because it’s available. Unless you have to move immediately, it’s a much better idea to wait it out and resume your home search after the market cools down.
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 Your Home
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 It Fairly
Even though homes tend to sell for more money in a seller’s market, it still 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
It’s even more important during a seller’s market that you carefully review the offers you receive. 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 be able to obtain those funds. Lenders will not allow buyers to borrow more than the assessed value of your home. The last thing you want is to accept an unrealistic offer and be forced to put your home back on the market when the deal falls through. The longer your home is on the market, the more questionable it will seem to buyers, and the more power they will have when negotiating.
Ensure The Buyer’s Mortgage Approval Early On
For any buyers who require financing, you should ensure that they have their initial mortgage approval before you accept their offer. This initial approval 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.
