Stressed home buyers: Here are 9 tips for buying a house in a sellers market

Woman relaxed while buying a house

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Finding the perfect home is always a challenge, but when the real estate market favors sellers instead of buyers, it can seem impossible. If you’re looking to buy a house in a tough seller’s market, don’t worry – you can still succeed! Follow these nine tips and you’ll be on your way to owning the home of your dreams. 

1. Get your mortgage preapproval

The first step in any real estate market is to speak to a mortgage loan officer to find out how much you can afford, what your maximum property tax amount is, and what your monthly note will look like. Though online home loan financial calculators might provide general numbers, they cannot review your credit history, or verify your debts, assets, and income. They also cannot determine what mortgage rates you will be given based on these factors, or what loan programs and options are available to you.

In a fast-paced competitive market, you’ll have to make quick decisions. If you find your dream home before getting pre-approved, it’s unlikely that a seller will take your offer seriously. And when there are so many buyers competing with you, the seller won’t wait a few extra days for you to get your mortgage preapproval before accepting another offer.

One of the best ways to stand out is to have your mortgage preapproval letter in hand. This shows sellers you are a serious buyer, and will give you an edge over other buyers who haven’t taken this step.

2. Have your finances in order before looking

Seller’s market or not, make sure that you have your finances in order before you look at homes. Through the pre-approval process, you’ll get a better understanding of how much cash you will need saved for your earnest money deposit, down payment, and closing costs, as well as other incidentals needed during the transaction. This will help ensure that you can secure financing and complete the buying process on time.

Another advantage to getting your preapproval before starting your home search is you may find after speaking with several mortgage brokers you cannot afford what you expected. If this is the case, work with your mortgage loan officer to fix any issues that can affect your financial situation before you begin your house hunt.

3. Know what you want before you start your home search

It can be difficult to find a home when you don’t know what you’re looking for. This is especially true for buyers in a hot market, where buying competition is high and home prices keep increasing.

Location and Budget

Once you know how much you can spend, start by choosing specific neighborhoods you want to live in. Then look at the typical price point for current listings within that neighborhood and note what styles of homes are common. If you hate split-level homes, but it seems like every home within your budget in a certain neighborhood is a split, then you may have to adjust your budget or location.

Needs vs. Wants

Next, decide on what features are necessary and which are wants in your new home. If you don’t have a specific list of features that are must-haves for your new home, it’s important to take the time to figure out what’s important to you before house hunting. This will help you avoid getting caught up in the frenzy and paying more money for a property that you’re not comfortable with.

Real estate TV shows make the home buying process look fun and carefree, but it can actually be quite exhausting. Even in a neutral market. Narrowing down your search to avoid wasting time looking at homes that aren’t right for you can relieve some of the stress of buying a home in a seller’s market.

4. Prepare to pay more than the asking price

In a neutral or buyer’s market, sellers would choose a list price at or above fair market value with the expectation that most bids would come in around or below that asking price. But in a seller’s market, homes are often priced with the goal of receiving multiple offers in a bidding war. This results in the final sales price being well above the asking price.

Go into your home search expecting to pay a higher price to compete in a bidding war for the most desirable homes. Look at the listing price as a minimum price for the home, and consider how much more you are willing to spend to make the home yours.

5. Make your first offer your best

When you finally find the right home for you, put your best foot forward and go in with your best offer and terms. There is little time for back-and-forth negotiations when competing with so many interested buyers, so listing agents will often call for best and final offers with proof of funds attached.

Having a robust and complete offer package can give you the upper hand in getting your offer accepted by the seller. Work with your buyer’s agent to outline all of your offer details, terms and proof of funds in order to stand out against other buyers.

6. Offer more favorable terms

Contingencies are essentially “outs” for the buyer. The least amount of contingencies you can have, the more favorable your terms are going to be for the seller. Here are a few ways you can still keep your contingencies but make them a bit more appealing to the seller in order to get you your home:

Appraisal Contingency

Unless you are a cash buyer, your lender will require an appraisal of the home. Waiving the appraisal contingency or offering an appraisal gap limit can give you an edge by making your offer almost as good as an all-cash offer. Waiving the appraisal contingency means that if the home appraises at a price lower than the contract price, the buyer agrees to pay more cash to make up the difference.

Offering an appraisal gap limit is similar, but it puts a limit on how much you agree to spend to fill the gap between a low appraisal and the contract price. Either of these options eliminate the risk of the deal falling through if your lender denies your mortgage application due to a low appraisal.

Flexible occupancy

Sellers need a place to live, too. With a limited supply of inventory in the current market, sellers often find themselves in the frustrated shoes of buyers. If you are not in a time crunch to move, giving the seller ample time to find their next home can put you at an advantage.

If for financial reasons, you need to purchase a new home, but don’t need to occupy the home. You could also offer to lease back the property after closing. This allows you to take ownership of the home and lease it back to the sellers for an agreed upon amount of time. There are some risks with a leaseback agreement, though, so I always try to advise my buyers against this option.

Inspection Contingency

Though I personally would never advise a buyer to waive the home inspection contingency, some buyers feel comfortable removing this contingency. This eases the seller’s risk of negotiating down to a lower price if the buyer finds any problems with the home.

One way around waiving the inspection completely, but still giving the seller reassurance that the buyer won’t walk away from the deal if the inspector finds any issues, is to perform the home inspection for informational purposes only. This means that any problems found in the inspection will be the buyer’s responsibility to resolve. And if the issues are too major for the buyers to fix, then they can still choose to walk away from the deal.

7. Stay calm and be prepared to walk away

Buying a house in a seller’s market can often feel stressful and frustrating, but it’s important to stay calm and level-headed. If you are not in a rush to buy a home, don’t let the fear of missing out and the pressure of bidding wars force you to buy a property that isn’t right for you.

More properties will come on the market eventually, and though you may have to make some compromises, you don’t want to rush into buying a home just to get buyer’s remorse after it closes.

8. Be prepared to make a quick decision when you find the right house

When there are too many buyers and not enough houses, it can sometimes take buyers more than a year to find the right home. But when the perfect home does come on the market, you better be prepared to act fast.

Getting your mortgage preapproval and finances in order, knowing what you are looking for in a home, and discussing your negotiation strategies with your real estate agent before finding a home will ensure that you can act quickly when you find the right house.

9. Work with a great real estate agent

If you’re not working with a buyers agent, now is the time to find one. This is especially true for first-time buyers. An experienced agent will have extensive knowledge of the current local housing market and can help you navigate the home buying process. They will negotiate on your behalf and offer the best advice on how to get the most out of your home purchase, even when the market is stacked against you.

Having a well-connected real estate professional on your side who knows the process of purchasing and selling homes is key to a smooth real estate deal. No real estate transaction is identical, and there are an infinite number of problems that can threaten a deal. Whether it’s a title issue, legal complication, or a personal or financial issue, your real estate agent should have the knowledge of how to resolve the issues, or know who to contact in order to get the issue resolved.

Conclusion

By following these home buying tips, buying a house in a tough seller’s market can be a much smoother and more successful process. With some careful planning and the right real estate agent by your side, you’ll soon be living in your dream home!

Author

Cristina Morizio

Long Island real estate agent Cristina Morizo
As an experienced REALTOR® and Long Island native, I know the ins and outs of the real estate market. I help home buyers, sellers, investors and homeowners navigate and negotiate. Questions? Ready to buy or sell? Let’s talk!

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