How to be a buyer in a sellers’ market
If you were in the market to buy a home a little over a year ago, your experience would be very different than it is today. You might make a day of visiting open houses to get an idea of what’s out there and what you want. You might have even been able to come up with a list of properties, go over the pros and cons of each and narrow them down like you’re on one of those home hunting shows.
And when you decided which house was the right one, you could high-five and hug your agent, as you prepared for in-person appraisals, walk-throughs and closings, shaking hands with everyone along the way.
As you certainly know, a lot has changed in the last year.
Great time to be a seller
Perhaps the biggest change in the homebuying process, however, is that we are now in a seller’s market. If you’re looking to buy, you need to be prepared to move fast to find your dream home. Taking your time, the leisurely decision process, the weighing of the options—all gone for now.
A seller’s market is when supply is low and demand is high. The current housing inventory is as low as it’s been in years. Prices are at their highest national average since 2006. New construction is starting to make up for the imbalance, but it will be years until the houses are finished and relieve the problem of low supply.
Demand is high for a couple of reasons, all related to COVID-19. Mortgage rates are at historic lows, as the Federal Reserve has lowered its Federal Funds Rate to stimulate the economy. In addition, millions of Americans are spending more time at home, and rethinking their needs because of that. Some are opting for more space outside of the cities, while others are prioritizing home offices and areas for remote learning.
Buy like a Boy or Girl Scout: Be prepared
So how do you prepare yourself to buy in a sellers’ market?
The last thing you want to do is find a home that you love, only to lose it to another bidder as you’re trying to figure out your financing. That’s why getting pre-approved is so important.
A real pre-approval from Guaranteed Rate is a great way to show a seller that you are ready to buy. Because our pre-approval includes underwriting, they will know you will likely be approved to buy the home. And a seller in sellers’ market won’t want to deal with the uncertainty if he or she has doubts about your offer and your ability to get final approval from your lender.
Get the money from mom and dad
It’s a fact of real estate life: many home purchases are made with help from parents and other family members. It’s a common situation that shouldn’t affect getting approved for a loan. However, if you need that money in order to buy the home, have it in your account before you make the offer.
It’s not necessary, but having that awkward conversation with your mom and dad after you find your home will slow you down, giving another buyer a chance to swoop in.
Don’t waste time window shopping
To many people, checking out homes that are for sale can be as much a fun hobby as it is an exercise in buying. But if you are serious about owning a home, now is not the time to be a looky-loo. That time spent visiting an open house with the price tag twice your budget is time that could be better spent finding a home you can actually afford before someone else does.
In fact, you can save yourself a lot of time by doing your homework on potential homes online. Checking out a few pics on a listing site may allow you to say no to a home and save yourself the trip to see it in person. Since some sellers are being extra cautious about who they let into their homes these days, this may be an even bigger timesaver than you realize.
Be ready to pull the trigger
Because there are so many homebuyers house hunting right now, homes are not lasting long on the market. The median time on market for homes nationwide, according to Redfin, is 28.2 days in November 2020. A year ago at that time, it was 44.2 days.
So if you see a home you like, be prepared to make the decision to put an offer in right away. It helps to have an honest and complete list of must-haves and deal-breakers. It also helps to know that you will most likely not get everything on your wish list.
Prepare for a bidding war
With so few homes for sale and so many buyers out there, you may need to mentally get ready for a difficult negotiation. You may even have to go over asking price, as more and more homes are seeing multiple bidders push the sale prices into that high territory.
One tactic to help yourself get ready is to look for homes below your budget, so you know you’ll have some wiggle room to move your offer up if you have to.
Also, if you find a home you really love, make a bold statement to the seller and put a bid in above what they are asking for. That could end the bidding war before it can even begin.
Write a love letter to the home
One of the more personalized tactics to take to help your offer stand out is to send the seller a letter telling him or her why you love the house so much.
Consider it this way: they’ve lived in the home, they love the home, and may be having a hard time leaving the home. Knowing that the person to whom they’re selling the home will love it and care for it just as much as they have can make that decision easier—and help your offer stand out from similar ones.
Over a year ago, in the fall of 2019, the world was a different place than it is now. But if there’s one thing we’ve learned this year, it’s how important home is. That’s why it’s so important to be prepared to buy in this crazy market.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact Guaranteed Rate for current rates and for more information.