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Buying a home can present challenges throughout the process, no matter the time of year or the state of the local real estate market. Certainly there are times throughout the year that can present fewer challenges than others.
Many real estate markets are experiencing low housing inventory levels. Low housing inventory levels in most cases lead to an advantage for home sellers and creates what is known as a sellers market.
Should I buy a home if there is a strong sellers market? What should I do to help ensure I’m prepared to purchase a home in a sellers market? Would it be beneficial to wait to buy a home?
These are just a few of the top frequently asked questions from home buyers during a sellers market. The first thing a buyer must do is decide whether they should buy a home now or wait. The buyer must then prepare themselves for the sellers market in which they are planning on buying a home in.
Below are some excellent tips for home buyers on how to buy a home in a sellers market.
What Is A Sellers Market In Real Estate?
It’s important when buying a home to understand the different markets that exist in real estate. Buyers market, sellers market, and a balanced market are the three most common. The easiest way to define a sellers market in real estate is as follows:
A sellers market exists when there are several buyers competing for the same home due to the lack of other housing options available for sale.
A topic you may hear real estate professionals discuss from time to time is relating to the housing inventory. A calculation that top Realtors will utilize to help their clients determine whether the market is shifted towards a sellers market, a buyers market, or neither, is a market absorption rate calculation. A market absorption rate calculator provides the number of months it would take to sell all of the remaining homes (inventory) for sale in a given area. The fewer months it would take to sell all of the remaining homes for sale typically means a sellers market exists and vise versa.
Factors To Consider When Deciding If Buying A Home In A Sellers Market Makes Sense Or Not
Buying a home during a sellers market is not for everyone. It’s important a buyer considers many things before deciding whether buying a home during a sellers market makes sense or not.
Below are a few considerations that should be made before buying a home during a sellers market!
Interest rates should be a big factor whether or not to purchase a home in a sellers market. Currently interest rates for mortgages are near historic lows, which make it a great time to purchase, even in a sellers market.
Selection Of Available Housing
It needs to be understood that during a sellers market, the number of homes that will be for sale will be low. If a buyer has very specific housing criteria, buying a home during a sellers market may not be the best idea.
During a sellers market, there’s a very good chance a buyer maybe put into a multiple offer situation. There are many things that can be done to give an advantage in a multiple offer situation, but it’s critical to understand that there is a great chance this is going to be a reality.
Since there is normally competition in a sellers market and multiple offers, it’s important a buyer understands they may have to pay full price for a home and possibly over the asking price! If a buyer is looking to submit low ball offers to sellers, buying a home during a sellers market is probably not the most opportune time to be buying.
How To Be Prepared To Buy A Home In A Sellers Market
Once a buyer decides they are up to the challenge of buying a home during a sellers market, now the hard work begins. There are many things that buyers need to do before looking at homes, while looking at homes, and once they have had their purchase offer accepted!
Below are some very important tips for buyers who will be buying a home during a sellers market!
Get Your Financing In Order
One of the most important steps to buying a home, whether it’s during a sellers market or not, is getting pre-approved for a mortgage before looking at homes. The most important reason why a buyer should get pre-approved for a mortgage before looking at homes is to ensure they are looking at homes that they realistically can afford. It makes absolutely no sense for a buyer to look at a home that is listed for $250,000 if the buyer only can qualify for $175,000.
During a sellers market, a buyer who has their financing in order before looking at homes gives themselves a significant advantage over their competition, other buyers. When a buyer submits a purchase offer, a seller should require a mortgage pre-approval or at the very least a pre-qualification letter from the buyers lender. If there are multiple offers on a property and only one of the buyers can provide a mortgage pre-approval, the probability the pre-approved buyers offer gets accepted is extremely high.
In addition to having an advantage over other buyers, a buyer who has obtained a pre-approval before submitting a purchase offer has a much better chance of negotiating with the seller on the price of the home and other terms of the contract.
Be Ready To Shop
Buying a home can take lots of time and effort, especially during a sellers market. Since the inventory level is low during a sellers market, it’s critical that a buyer is ready to shop for a home. During a sellers market, it’s very common that a home will have multiple offers within the first 12-24 hours of being for sale.
A buyer who is only able to look at homes on Saturday mornings and Sunday afternoons is likely to lose out on the home of their dreams. Recently while selling a home in Irondequoit, NY, a buyers agent indicated the buyer had significant interest in the home but could not be available until the following weekend to bring back their family members. During the week there were other showings and eventually an offer from a different buyer. The buyer who had the significant interest lost out on the home and was “heartbroken.”
Buyers who decide to buy a home during a sellers market must make themselves available. Whether it means using their lunch hour to view a home or during the evening after work hours, it can be the difference between a buyer finding their dream home or not.
Select A Top Buyers Agent
Choosing a top Realtor is important, however, it becomes an absolutely must during a sellers market. It’s important that buyers understand how to interview a buyers agent when buying a home. During a competitive sellers market, it’s critical that a buyers agent is able to accommodate the buyers schedule to view homes. Not being able to show homes to a buyer because they are a part-time Realtor or don’t work nights is not acceptable. This can cost a buyer the opportunity to buy their dream home.
In addition the availability of a buyers agent, the ability to know how to negotiate on the buyers behalf is extremely important. An experienced buyers agent should be able to advise a buyer on how to improve the chances that their purchase offer is accepted. Having a top buyers agent can be a huge advantage in a sellers market.
Consider Which Contingencies You Absolutely Need
One of the top reasons a buyers purchase offer is rejected is due to the number of contingencies that are in the purchase offer. There are many common contingencies that home buyers have the option to add in their purchase offers. The more contingencies that a buyer has, the greater the chance a transaction does not get completed, which is a greater risk for a seller.
In a sellers market, it’s unlikely that a buyer who has a sale and transfer of title contingency will end up with their dream home. Even though the sale and transfer of title contingency is a very common contract contingency, during a competitive sellers market there are many buyers in the marketplace who can purchase a home without having to sell one.
Another contract contingency that buyers will consider not including in a purchase offer in a sellers market is the home inspection contingency. There are way more reasons why a buyer should have a home inspection when buying a home, however, some buyers will waive the inspection contingency to help “sweeten” their purchase offer.
Be Realistic & Flexible
As mentioned above, during a sellers market the price a buyer will pay for a home is likely to be higher than if they were to purchase a home during a buyers market. Buyers who are buying a home during a sellers market need to be realistic with the price. A buyer who has prepared themselves that they will likely need to offer close to an asking price is much better off.
If able, a buyer who is flexible with dates and deadlines in a contract is going to have an advantage over other buyers in the marketplace. A top buyers agent will know what questions to ask a sellers agent in order to structure the purchase offer to give the buyer an advantage. A few of the questions that a top buyers agent should ask to help structure a contract include;
While it’s not always possible to get the answers to these questions, having the answers to these questions will undoubtedly make a difference. A buyer who puts inopportune dates in a contract is likely to have their offer rejected or lose in a multiple offer situation.
Buying a home during a sellers market is not for everyone. There are many factors that need to be considered in order to help decide whether it’s a good idea or not. One thing is for sure, buying a home during a sellers market is not for “the faint of heart.” As mentioned above, having a top Realtor is critical when buying a home during a sellers market. A top Realtor can help a buyer decide whether waiting is a better option and will be looking out for the buyers best interest, not the best interest of their pocket book!
Other Top Home Buying Resources
Are you a Rochester, NY home buyer? If so, the local market is currently shifted towards a sellers market. The above tips should be followed to help your home buying experience more enjoyable and successful! If you have not selected a Rochester, NY real estate agent, contact me, and I’d love to share my knowledge and experience of selling homes in a sellers market.
About the authors: The above article “How To Buy A Home In A Sellers Market” was provided by the Keith Hiscock Sold Team (Keith & Kyle Hiscock). With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
Visit our website at www.HiscockHomes.com.
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