This spring has been an unusual one here locally, but it is reflecting a trend we are experiencing nationwide in the real estate market. There is a notable lack of inventory, especially for homes priced between $125,000-$350,000. There are many factors contributing to this trend including the high price of new construction, rising interest rates, economic uncertainty, and increase of investor owned rental properties in the wake of the housing crisis.
While this is an excellent time to sell your house, it certainly makes it challenging if you are looking to purchase. Most of my recent listings have sold within the first day or two, many with multiple offers. Buying a home in a seller’s market requires a different approach and mindset. I have been guiding several buyers through this difficult market, and I thought it might be helpful to share some important tips that will help you buy the right home when inventories are scare.
1. Work with an experienced agent
It is critical to pick an agent with experience to help guide you during a market with low inventories. Having a knowledgeable person at your side who knows the market well and can offer sound advice will keep you from overpaying or making bad decisions.
2. Get a pre-approval letter
Because things move so quickly in a sellers market, you must be prepared to write a good offer as soon as you see a property. No seller will accept an offer without a pre-approval letter or proof of funds (if you are paying cash). Getting this information before you see a home will save you time and allow you to get your offer to the seller as fast as possible.
3. Be prepared to see homes as soon at they hit the market
Your Realtor will set up your client portal which will allow you to see homes as soon as they hit the market. In a seller’s market, time is your chief enemy, especially when homes sell within hours of listing. Getting in to see a home as quickly as possible is key since your “dream home” may already be under contract two or three days from now.
4. Move quickly once you find a home you like
An experienced agent will have all the paperwork ready to write an offer in a tight market. They will be able to guide you on pricing and will be able to provide advice on condition and insight on competition and recent sales. You will need to make a decision quickly. Taking a day or two to think it over probably means losing the house. This type of market can be very stressful for buyers since it requires very quick decision making. If you are a person who likes to take time to think things through, it may be best to wait until the market settles. Eventually, this market will change and inventories will once again increase, so waiting it out may be a better option for you.
5. Present your best offer
If you have found the home you like and are ready to buy, make sure that your first offer is very strong. Keep in mind that when inventories are low, you may be in a multiple offer situation every time you write a contract. This is not the time to try and negotiate a bargain. Don’t forget that pricing is not the only tool in your arsenal. Financing, inspections, as well as closing and possession dates are other parts of the contract where you have the opportunity to win the deal. While you do need to be careful not to overpay, you certainly want to present an offer that will be hard for the sellers to refuse.
6. Write a personal letter to the sellers
This is a good idea in a tight market and can make all the difference. I am convinced that a well written letter from my clients to the sellers (written from the heart) won them the house in a recent deal. In a market where buyers are scrambling for the same property, a personal letter may give your strong offer an advantage over your competitors.
7. Be realistic about inspections and repairs
Deals fall apart all the time, especially over inspections and repairs. In a seller’s market, home owners feel emboldened and may be less likely to accommodate requests for repairs. You and your agent need to decide how to proceed once you receive the inspection report. If you are convinced this home is the one for you, you may have to accept that the sellers may do little to rectify problems found in the report, especially if they had multiple offers on the property.
8. Be prepared to be flexible
Here I am talking flexibility in two different ways. The first is being open to a wider range of homes in your search. While a certain neighborhood or home style may be your preference, you will be severely limiting yourself by not widening your view. If you can be more flexible in your home search, the number of homes available to you will certainly increase.
Flexibility is also key once you find the home you want to purchase. As I mentioned above, you may need to work with sellers on inspection results, as well as other factors such as closing and possession dates in order to keep the deal together.
9. Miss out on a home you like? Consider writing a back-up offer
I have had several agents present very strong back-up offers even after we are under contract. Those offers include a pre-approval letters, a strong price and in some cases a personal letter to the sellers.
If you see a home you know would work for you even though it is already under contract, have your agent inquire if the sellers would accept a back up offer. If their current deal falls through due to financing or inspection issues, your offer would be next in line for consideration. If the sellers do accept your counter offer, make sure your Realtor stays in contact regularly with the listing agent to see how the deal is holding together.
Buying a home in a seller’s market is stressful and requires patience, quick decision making and a lot of flexibility. Although it may be tempting, you do NOT want to overpay for your new house, especially if you don’t plan on living there for more than 10 years. Having an experienced Realtor at your side to help you through the process can make it a lot easier on your mental health and on your bank account.
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