WHAT HOMEBUYERS SHOULD KNOW IN A SELLER’S MARKET
During the past several months, we’ve been writing about huge housing demand in a limited-supply market. This has been driving up housing prices to unprecedented heights, especially in North Texas.
So, what is a potential homebuyer to do in a seller’s market? While some might choose to wait it out, others might not want to deal with the hassles of renting. For buyers who want to move into a home sooner rather than later, it’s important that he or she be prepared, and “offer-ready.” According to experts, the following tips can help.
Understand “Want” Versus “Need.”
A buyer might have to forgo the stainless-steel appliances, hardwood floors and light-blocking window treatments for a house in a perfect neighborhood. Yes, great appliances, shades, and floors are nice, but such amenities are “wants,” while neighborhood, backyard and good school district are “needs.” Amenities can be added at a later date. It’s much more difficult to change locations if the buyer compromises on a desired neighborhood.
Ensure Finances are in Order
It’s very important to shop for mortgage financing, even before the house-hunting begins. Pre-qualification is a must in a seller’s market, while pre-approval can help give the potential home buyer a larger boost over the competition. Some lenders, in fact, are underwriting before a house is under contract, which shortens the closing time.
The buyer should also make a budget and stick to it. In addition to mortgage costs, the budget should also focus on homeowner issues such as taxes, utilities, and insurance. With this knowledge, the buyer won’t lose his or her head, if a bidding war with other sellers ensues.
Be Ready to Submit an Immediate Offer
Houses in a seller’s market rarely stay on the market for long – there are plenty of other buyers that want the same houses and are willing to do what it takes to get them. As such, when a house that meets the needs and is within budget comes to the market, the buyer should be prepared to make an immediate offer. Over-analyzing an asking price (or an offer) can cost the buyer a house.
Forget About Negotiation
While negotiating a house’s price is a time-honored tradition in buying and selling, there is no place for it in a seller’s market. Submitting a low-ball offer, or demanding certain contingencies, means the seller will move on to the next bidder with a better offer with fewer demands. Some experts suggest submitting the top offer, and adding escalation clauses to the bid.
As mentioned above, contingencies should be limited when it comes to a bid. In multiple bidding situations, it’s not always the highest offer that attracts the seller, but rather, the contract with the fewest contingencies or restrictions. Issues such as a flexible move-in date and taking a house “as-is” can help a bid stand out from others.
Along these lines, it’s important for the buyer to be realistic about inspection and repairs. The more competitive the market, the less likely a seller will be to make repairs. However, if an inspection reveals expensive defects (such as foundation issues), the seller might be willing to lower the price.
Work with an Experienced Agent
In a seller’s market, there is no reason why a buyer shouldn’t work with a seasoned agent. In fact, it’s probably mandatory. In most cases, buyers don’t pay commission to real estate agents and Realtors; that’s the seller’s job. The seasoned real estate representative knows the ins and outs of a particular market and can provide insight regarding inventory, prices, and costs. That agent is also the buyer’s best resource in the event of a bidding war or difficult seller.