Demand is high and inventory is low, and that means this year's spring market is indeed a seller's market. In this kind of real estate climate, homebuyers must act differently than they would in other circumstances.
Right now, competition is fierce, and for any house you want, the sellers are probably fielding multiple offers. Hence, they hold a lot of leverage, and it is up to you to make yourself stand out with the most compelling offer.
To be a homebuyer in a seller's market, here are a few things you should do:
1. Make sure your local market is consistent with national trends
As you have probably heard before, all real estate is local. Even though it is an overall seller's market on a national level, the specific area you're looking at may be a different story. As a result, it is vital you research the current conditions in your area to make sure you are working within a seller's market. If not, you won't have to be as aggressive.
According to Realtor.com, the way to determine whether a local market is currently a seller's market is to check local listings and see how long homes have stayed on the market and whether or not they are selling for more than their asking price. If most homes have been on the market for over six months, you are not in a seller's market.
2. Don't expect to negotiate
According to U.S. News and World Report, a seller's market more or less requires buyers to open with their best offer.
In a different climate, explained Realtor.com, you might be able to make an offer lower than the asking price to leave room for negotiations. In a seller's market, this option is pretty much off the table, and chances are the property will sell for even higher than the asking price.
Experts on Realtor.com advised buyers to go as high as is financially viable for them when making an offer. Don't make an offer that, if accepted, will put a large financial strain on you, but bid as high as you can.
3. Hire a good real estate agent
According to HSH, a publication focusing on the mortgage market, a good real estate agent is essential in a seller's market. Not only will your agent be able to guide you through the hectic process, but he or she will also likely have connections to listing agents, which could make a big difference.
4. Shift your home inspection expectations
While a home inspection is still absolutely necessary before closing, U.S. News and World Report cautioned that the sellers will likely be less willing to help cover the costs of repairs. Sellers will know their home is a hot item, and they will understand that you need them more than they need you. In a seller's market, a home inspection is more about making sure the house is in a shape you are willing to take on.
5. Get Preapproved
Once you have determined your market is indeed a seller's one, make sure you get preapproved for a mortgage before you start looking for a home.
Remember that sellers will have their fair share of offers to choose from, and they are unlikely to consider someone who can't prove he or she is in a financial position to make the purchase. After all, why pick someone at risk of letting the deal fall through when there are so many other buyers with proof of financing? In addition to a preapproval letter, it would be wise to have a proof of funds form authorized by your bank.
6. Expect to make quick decisions
In a seller's market, homes are sold very quickly, and you may have to make an offer the moment you decide you like a property. If you know what you want before you begin your search, you will be in a better position to make quick decisions.
When it comes down to it, buyers in a seller's market need to be prepared and flexible. As long as you know what you're doing, you still have hope of finding the home of your dreams.