Tips for Buying a Home in a Seller’s Market
As with other markets, ups and downs are a normal part of the housing market. As more people have prioritized their home life amid a global pandemic, there has been increased focus for many on finding a living space that is also suitable for work, school, and play. And heightened demand for homes has created a “seller’s market,” meaning there is more demand than supply. The result is increased competition for available homes.
Purchasing a home during a “buyer’s market” is preferable from a financial standpoint, as having more homes on the market than there is demand for can drive prices down. However, it’s not always possible to time the need for a new home with a buyer’s market. If you’re looking to buy a home in a seller’s market, it’s important to know how to make the best of your position as one of many buyers interested in a limited supply of homes for sale.
Identifying a Seller’s Market
When the demand for houses outweighs the supply of houses available, sellers have a distinct advantage. Prices for houses rise in a seller’s market due to the competition for available homes. Sellers can raise prices, and buyers may find themselves in bidding wars for homes. A bidding war is a worst-case scenario that drives the price of a home beyond its original listing price.
A simple way to find out if it is a seller’s market is to ask your local real estate agent. Agents will know the signs of a seller’s market:
- Fewer houses for sale in their territory than usual
- Expanding neighborhoods to meet the needs of a growing population
- Homes remaining on the market for a short period of time
- Rising prices for available real estate
- Multiple offers being put in for homes
Buyers can research some of these signs on their own as well. Popular home buying websites provide search tools and records for determining current and past home prices and days on the market of recently sold homes.
Buying Wisely in a Seller’s Market
Buying a home in a seller’s market usually puts the buyer at a disadvantage. Knowing that going in is important for several reasons:
- You’ll need to have a good grasp of how much home you can afford given the current market conditions
- You’ll need to be ready to pounce the second you find a home that meets all of your needs, so you should have a pre-approval letter from a lender in hand
- You should give thought to how much you’re willing to compromise on repairs, as it’s much easier for homes to sell as-is — without requiring repairs of the sellers — in a sellers’ market
Once you find a home you like, you should make the best offer possible; this will usually be the listing price. A homeowner who wants to sell quickly is likely to be happy to get their asking price. If a seller hesitates to accept a full-price offer, however, there’s a good chance they’re waiting to see if other buyers will be interested in outbidding you.
Besides paying above the listing price, bidding wars have another major downside: they continue to drive prices up in the market, making it more difficult for other buyers like you to find their ideal home at an affordable price.
If you find a home that you absolutely love but requires repairs, think hard but fast about whether you’ll ask the seller to make those repairs, or whether you can make them on your own. In a seller’s market, homeowners are less likely to want to bother with repairs that are not so significant as to seriously drive down the home’s appraised value.
Finally, be on the lookout for homes being sold directly by homeowners, rather than through a real estate agent. In a seller’s market, homeowners often choose to go through the process on their own so that they don’t have to pay a commission. Look out for “for sale by owner” signs in your desired neighborhood, and keep an eye on online home listings that don’t require that homes be posted by real estate agents. Likewise, don’t discount a home just because it’s under contract, as deals sometimes fall through and homes are re-listed. Plus, after a failed sale, sellers may be more willing to compromise on price and repairs.
Hero Loan Is Here to Help
Hero Loan specializes in helping veterans get mortgage loans while giving back to the community. Buying in a seller’s market can be costly, but Hero Loan saves buyers money by underwriting loans in-house, leading to lower mortgages and upfront costs. Get a quick turnaround with a direct-endorsed VA lender. Contact us today to get started on your loan application in five minutes.