In many metro housing markets these days, you’ll find low inventory, rising prices, bidding wars above the asking price, and fewer sellers willing to negotiate terms, because — quite frankly — they have the upper hand. In a seller’s market, buyers have to know what they want and be willing to act quickly to get it. If you’re looking to buy, it’s still a good time to do so (interest rates are at record lows and homes are very affordable). Here are five tips for buying in a seller’s market:
1. Get your financial house in order — Tighter lending restrictions and requirements mean that potential borrowers need to have a strong credit score, a solid credit history and a decent amount of cash in hand for a down payment, especially for conventional loans. FHA and VA loans require smaller down payments, and they’re attractive loan options for first-time or low-income borrowers who don’t have at least 10 percent to put down.
2. Get a pre-approval letter — After your finances are in order and you’ve narrowed down your home search, ask your lender for a pre-approval letter. Having this document in hand when you’re looking at homes gives you stronger credibility as a buyer, because a seller will see you can make good on your offer. Plus, it indicates to all parties that you’re serious about buying.
3. Act fast — If you or your agent see a property come on the market that’s close to or exactly what you’re looking for, don’t wait until the weekend to preview it; request a showing as soon as possible. In many markets, low inventory is causing bidding wars and, in some cases, houses are off the market within hours of being listed. Time is of the essence in a seller’s market, and delaying even a day to look at a property and write an offer can put you at risk of missing out on the home of your dreams.
4. Be prepared to offer your ‘highest and best’ — You might hear your agent use this phrase, because it’s a common chorus being repeated by real estate agents nationwide. Some buyers might offer full — or even more than — asking price, which creates a bidding war. Other buyers might have an upper hand because they can bring a larger down payment to the table and have more skin in the game than a buyer relying on 100-percent or FHA financing. Your highest and best offer helps eliminate the back-and-forth that might prompt a seller to move on to another offer.
5. Request concessions that are necessary — In a situation with multiple offers, the proverbial ball is in a seller’s court. If you start asking for concessions for things like money toward an older (but functioning) air conditioning unit or carpet replacement because the color’s outdated, the seller might put your offer at the back of the pile. It’s best to ask for concessions on structural or hazardous issues that come up in the inspection process — and avoid haggling over aesthetic issues that are much more easily addressed down the road as you make your home your own.