What is a Sellers Market and How Do I Buy a House In One?
Today’s red-hot housing market has buyers in a frenzy. With low interest rates expected to rise and a meager home supply, competition is stiff. Finding ways to stand out presents a real challenge and the cluttered market may feel overwhelming, but it’s not impossible.
What Is a Seller's Market?
A seller's market is made up of much of what we're seeing in the current housing market – more homebuyers than there are available homes on the market, giving sellers the upper hand in negotiations.
Even in the midst of heightened competition and bidding wars, buyers can develop a competitive edge by starting with a few simple steps right from the beginning. If you’re thinking of buying a home right now, consider the following:
Start With the Small Stuff
Tackling things that may seem like smaller items are a good first step in developing your homebuying checklist.
- Check your credit score. Credit history and your current score could determine how you stack up against other buyers, and you’ll want to ensure that you’re getting the best mortgage package to fulfill your home purchase – so prepare your credit before your search begins. Fix any errors, even the small ones like accounts you previously thought you closed, as they will impact your total score. Tip: There are many free online services that can provide you access and guidance for improving your overall credit score.
- Research homebuying methods that best fit your needs. There are many different approaches to home selling and buying today. Research your options to understand what method is the best fit for your unique circumstances. For example, a traditional real estate brokerage firm will have you work directly with a licensed real estate professional, and is the most traditional option in homebuying. Real estate professionals can measure your needs and leverage market knowledge to better inform an offer. But not all real estate professionals are created equal. Interview at least three, check references and analyze how they’ve done with recent purchases. You could also start with an online real estate platform, an option rising in popularity. Online real estate platforms offer a simple, flexible home shopping experience. You can match your objectives with market and neighborhood insights, view options nationwide and match with a quality real estate professional who will provide you with the best options for buying, all without leaving your home. For the busy buyer or “do-it-yourselfer,” this option is effective and secure.
- Look for a lender. As you search for a home, you’ll want to meet with a wide range of mortgage lenders to determine the terms of a loan you qualify for. Be sure to shop around for mortgage lenders as many may offer differing processing fees, loan interest rates and varying closing times, which could impact your overall homebuying process and purchase. Additionally, before you begin your home search you should meet with a mortgage broker to get preapproved for a loan. Preapprovals give you a great idea of how much home you can afford, therefore narrowing your search.
- Draft a budget. Purchasing a home is an expensive undertaking and you’ll need to map out your entire budget well before you consider moving toward buying a home. Mortgage brokers and lenders can be a big help in mapping out unexpected costs and determining what your closing costs could look like.
- Factor unexpected costs into your budget. You may have to spend more on closing costs than initially anticipated. Expenses like inspection fees, lawyer fees and even your first home insurance payment could be more than you expected. It’s important to set aside more than you might at the beginning of your homebuying journey to ensure you’re able to cover the costs of appraisals, taxes, title insurance and more. Closing costs are usually between 3% and 5% of the total purchase price of a home.
Consider Your Offer
With so many other hungry buyers seeking homes today, consider the following options to make your offer as attractive as possible:
- Leverage cash if you can. If you’re able to purchase a home with an all-cash offer, it’s recommended to do so. Cash offers are sellers’ dream offers as they allow the homebuying process to move far quicker than a traditional mortgage lender. SOLD.com has a network of companies who will turn you into a cash buyer by buying the home for you. These services can level the playing field against other well-qualified cash buyers.
- Make a personal case for your offer. It doesn’t hurt to reach out to sellers in a letter expressing your interest in their home and showcasing your passion in maintaining their home. Sometimes the personal touch can make all the difference.
- Consider covering all the seller’s closing costs. Seller closing costs consist of various fees ranging from the agent commission to HOA fees to title insurance. Buyers today are often covering both the buy- and sell-side closing costs to entice sellers. If there are other hidden fees you can cover for your prospective seller – such as home repairs – this may give you another edge.
- Consider offering more than the asking price. Depending on the market, some homes are selling for well over asking price. You may need to offer more than the list price in order to win in the most competitive markets.
So an Offer Has Been Accepted, What Comes Next?
Next comes closing, which can be a lengthy process for both the seller and the buyer. Here are the key closing events to prepare for:
Appraisal. The appraisal is a key component of the transaction. An appraisal is an unbiased professional opinion of the value of a home, where a licensed professional surveys the home and verifies that it is worth as much as the seller is claiming.
Inspection. Inspection day is an important opportunity to have the property thoroughly reviewed by a professional, ensuring full knowledge of any potential maintenance issues with the home and allowing for certain repairs to be negotiated with the seller.
Final walk-through. Typically, the walk-through happens either the morning of your closing or the day before. This gives the buyer a chance to review the state of the home and ensure that the sellers have made all the repairs or upgrades that they said they would. If the buyer finds the state of the house to be unsatisfactory, it could delay the closing by days or even weeks.
Purchasing a home in today’s market is a challenging, impactful decision. After all, it’s the biggest purchase most people will ever make. But there are ways to make the process as smooth as possible. Consider options when purchasing a home and don’t put off the small things, as even the slightest discrepancy could impact your experience.