Picture this – you’re in the market for a new home, and you quickly find one that is perfect. It has all the features you’ve been dreaming about and seems to be in your price range. So, you put in an offer.
However, your excitement quickly turns when you discover that you were outbid or, worse, weren’t even given a chance to bid in the first place. Unfortunately, the current real estate environment is a “seller’s market,” which can quickly lead to a frustrating home-buying experience.
But all is not lost. You will find your perfect home; it just may require a little more work, patience, and understanding of how to navigate this type of market.
What is a Seller’s Market?
In real estate, a seller’s market is when home inventories are low, causing a spike in demand. You can typically identify a seller’s market when:
Homes sell quickly, usually within a few days of being listed,
Bidding wars break out between potential buyers, driving up prices, or
Homes are selling over the asking price.
Low-interest rates will perpetuate this type of market since financing is cheaper, attracting more potential buyers into the market.
In contrast, a buyer’s market is when home inventories are high. The Great Recession of 2008 is a perfect example of a situation that created this type of scenario. Many homes went into foreclosure, causing the number of properties on the market to skyrocket. With more houses for sale and fewer buyers, home values dropped significantly.
Tips for Buying a Home in a Seller’s Market
There are strategies to help you navigate a seller’s market:
Get Pre-Approved for Your Home Loan. A pre-approval is crucial for two reasons in a seller’s market: It helps keep you within your budget and lets you know how much you can spend. Second, homes sell quickly, and sellers want to know you have financing lined up. For this reason, most sellers won’t consider offers if you aren’t pre-approved for a home loan.
Hire a Great Real Estate Agent. You want an agent who knows what is coming up for sale before other potential buyers. An experienced real estate agent will also be able to provide insight on bidding strategies should multiple buyers make offers on the property you want.
Set Your Bidding Budget & Stick to It. If you make an offer on a home, chances are it won’t be the only offer that particular house will receive. So as bids start to rise, it’s crucial that you’re not making emotional decisions. You’ll want to set your top-line budget and stick to it. Knowing when to walk away is just as important as your final bid.
Be Patient. It’s easy to fall in love with a home. But buying a house is one of the most significant financial investments you’ll make in your lifetime. You want to ensure you’re making a wise financial decision. While the market may be in a frenzy, be patient, and the right home will find its way to you.
Buying a home in a seller’s market can be challenging, but it’s not impossible. With a pre-approval and an excellent real estate agent by your side, your new home isn’t far away. Be patient and stay within your budget. Knowing when to walk away from a home is just as important as making an offer.
If you’re ready to begin your home search, we’re here to help. Our Mortgage Consultants are available to answer all your questions. Our goal is to make sure you understand the home-buying process and are financially prepared to take on this next chapter of your life.
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