The housing market is constantly in flux, and thanks to the market dynamics of supply and demand, it often tilts between favoring buyers or sellers. If you are thinking about buying or selling a home, it is important to understand the market dynamics that could affect your bottom line.
Buying a home always has its challenges. But when you’re trying to do it in a seller’s market, the difficulty can reach a new level. But do not dismay! Buyers in a seller’s market can get what they want, but they need to have a solid plan in place.
In all our years in the real estate space in the Inland Empire, we at Windermere have seen buyers make common mistakes that have resulted in them missing out on the home of their dreams! To help avoid this happening to you, our expert team has listed some of the common mistakes that buyer’s make in a Seller’s Market.
What Is a Seller’s Market?
In a seller’s market, demand for housing is high, but the supply of homes for sale is low. This imbalance in supply and demand can lead to bidding wars and rising home prices. The cause of a seller’s market can vary based on economic factors both national and local. For example, certain cities can experience a high demand for homes and low inventory if new businesses open or there is an influx of new residents. On a national scale, low mortgage interest rates can inspire more people to buy, and that increase in demand can trigger a seller’s market.
As the name indicates, sellers have a slight advantage when their home is listed during a Seller’s Market, since there are often more buyers than homes available on the market. This is not to say that you should avoid buying in a seller’s market. But if you are planning on buying or selling, it is important to learn how to recognize a seller’s market and how to navigate one.
Signs of a Seller’s Market
These are housing trends that signal a seller’s market:
- Low Inventory. Few homes are listed for sale, leaving limited options for homebuyers.
- Houses Sell Fast. Homes on the market sell quickly since there’s a high demand.
- Houses Sell Over Asking Price. Bidding wars with competing offers occur frequently, pushing sale prices above the original asking price.
- Sellers Have More Leverage. Sellers have the upper hand when negotiating home prices and deal terms since there is elevated competition among buyers.
7 Buyer Mistakes in a Seller’s Market
· Not Being Ready and “On-Call”
When we say homes go fast in a seller’s market, we mean it. When a market is hot, properties are moving quickly from “just listed” to “under contract” within a matter of days or even hours. You have to be ready to seize on a good opportunity as soon as it hits the market. It is not unheard of for people to make offers on a home before they even see it in person. You must have an “on call” mindset or you could miss out!
· Not Getting Pre-Approved
You might be confident that you will be approved for a mortgage loan based on your steady income, your low debt-to-income ratio, and your high credit score — but the seller cannot rely on that. The only way to prove to the seller that you are a qualified buyer is to be prequalified from a lender. A pre-approval letter determines how much you can borrow after submitting your financial information like income and credit. Getting approved ahead of time is the best way to show the seller that you are serious and ready to buy now.
NOTE: Pre-Approved is different than Pre-Qualified! Pre-qualification means that you simply told your lender your financial story. Pre-approval involves submitting a mortgage application, complete with providing verifying documents. Pre-approval from a reputable lender is key. Presenting this shows the seller that the buyer has already set the wheels in motion and is serious about making a deal.
- Not Making Your Best Offer First
Most people want to buy as much as possible for as little money as possible. So when most people see the listing price of a home, they naturally wonder what they can really get the house for. Offering lower than asking price is a reasonable strategy, especially if the house is overpriced compared with other similar homes in the area, or if it is a buyer’s market with lots of available inventory.
But trying to get a deal when you are the buyer in a seller’s market might not be the best tactic. Not only is it important to make an offer quickly, but even more important to make a good, strong offer. In a Seller’s Market, there’s no time for what I call “low-ball” offers. In a seller’s market, you need to go all in with your best offer up front since this market indicates a shortage of inventory and fierce competition. Most sellers in this market have the luxury of waiting to get the price they want, not to mention they could receive multiple offers at one time. Therefore, you should present your best initial offer, giving the seller a reason to work with your offer over another.
- Not Being Prepared for a Bidding War
If there is ever a time when a bidding war could be imminent, it is during a seller’s market. Odds are your offer will be rejected at least once during the home buying process. You may even enter a bidding war, which can cause you to pay over your max budget if you are unprepared. The best way to stay within your budget is to search for homes below your price range. This creates some leeway in case negotiations take place after your initial offer. During negotiations with the seller, your real estate agent will be your best asset.
- Over-Analyzing the Purchase Price
Over-analyzing a home purchase in a seller’s market is ill-advised. When you wait too long, you risk losing the home you have fallen in love with. Once you have finally found a home that meets all your qualifications, make the offer! To give yourself more leverage, be prepared to move quickly by having your finances in order — get a preapproval.
· Expecting a “Great Deal”
It is a hard pill to swallow, but “great deals” do not often exist in a Seller’s Market, unless the homeowner is highly motivated to sell quickly. The words GREAT DEAL in themselves are very subjective. In a market on the rise, most purchases look like a “great deal” a year or two after the transaction.
- Working With an Inexperienced Agent
Choosing the right real estate agent is imperative when buying a home in a seller’s market. If you have a seasoned agent on your side, you will probably have a better chance of getting the home you want. Experienced agents know the ins and outs of the local market and help you save time and money. Plus, in most cases, buyers do not pay real estate agents; sellers do.
Find the Right Agent
If a buyer has a lot of homes to choose from in the area that he wants to be in, then it’s a buyers’ market. If there are few homes in that area, then it’s a sellers’ market. You can figure it out by asking your agent or you can go online and look at the number of homes that are for sale in your area.
Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.
Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002