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How to buy a home in a Seller’s Market
How exciting, you’re considering buying a home! Our homes are where a lifetime of memories are created and even stored. Our memories can be made around the Kitchen table as we gather with our family to devour our meals of the day; devour when we have a great cook in the family, that is! Perhaps, it’s not the great cooked meal you’ll remember, but the laughter shared, which is just as good as a delicious homemade meal. And it’s not just the Kitchen where memories are made as just about any spot in your home can be filled with memories. With this in mind, you realize the very big deal about buying a home, so you want to make sure that you get it right. No matter the season, and no matter whether you’re buying a home in Coral Springs or nationwide, this will help you have home buying success.
We’ll discuss here how to buy a home in a Sellers’ Market. Just how do you do it? Do you even know what a Seller’s market is? It’s important to understand the different Real Estate markets that will develop over different time periods. Currently here in my local Real Estate market of Coral Springs Florida, we are experiencing a Seller’s Market. This doesn’t mean that your local market is experiencing the same Real Estate market. It will be important that the Realtor you hire knows what type of market you’re in, so they can best guide you during the home buying process for your benefit in home ownership.
Let’s take a closer look at the types of Real Estate markets:
A Seller’s Market, as the name implies, is when the local Real estate market favors Sellers. Typically, the inventory of homes is less than a 6 months supply. Absorption rates measure this inventory. This is determined by knowing how many homes are active for sale and how many homes had closed the month before; this determines the supply of homes, as an absorption rate reveals. The last reported absorption rate for my local market of Coral Springs Florida came in at 3.67% when a year ago it was 2.09%. Even though the supply of homes has increased from a year ago, we’re still experiencing a Seller’s market with just under a 4 months supply of homes for Buyers to choose from. This article’s focus is on our current Seller’s market and how to be able to buy a home in a Seller’s market.
A balanced market is when the Real Estate market isn’t favoring Sellers or Buyers. It’s smack dab in the middle and balanced. This is typically experienced when there is a supply of 6 months of homes for sale in any local Real Estate market.
A Buyer’s Market, as it’s name implies, favors Buyers. A Buyer’s market will show active homes for sale typically over a 6 month supply. Loads of homes from which Buyers can select from in their home search; a Buyer’s dream, of course. There seems to be enough homes for everyone to buy, just take your pick!
Now that you know the differences between the types of Real Estate markets, we’ll go through what it takes to guide you to buying a home during a Seller’s Market. Knowing what to expect, how to prepare and how to win over the Seller can make all the difference in buying your home. I’ve listed a number of things below that you can do to help you win the home you’ve just found. Keep in mind, that this knowledge you’ll be gaining is part of the research process that you hopefully started when you first began to consider home ownership. What will help you to buy a home?
Be Pre Approved with your financing
Before you even begin to set out to buy a home, it’s critical that you have your Lender confirm your ability to buy a home by providing you with a Pre Approval for a loan. A Pre Approval goes beyond a verbal conversation between the home Buyer and their Lender. For a Pre Approval, they’ll want to review your credit, income and assets to determine your eligibility for financing. They’ll look at your credit report, your pay stubs, your bank statements and your tax returns, to name a few. The verbal conversation is what you’ll likely see in a Pre qualification which will be of no value to a home Seller considering your qualifications to afford to buy their home.
This Pre Approval will be be in the form of a written letter from your Lender that spells out your ability to buy a home; the Seller’s home. This letter will be presented along with your Real Estate purchase contract.
Be fast with your offer
When you locate a home that meets your wants and needs, don’t lollygag about making the necessary arrangements to view a home. When you come across a home that you really like, you can imagine you’re not the only Buyer who thinks this home would be perfect for them. Let your Realtor know that you want to see the home right away. If it’s Monday when you see it online or your Realtor brings it to your attention, you don’t want to wait until Saturday to take a look. When Saturday rolls around there could easily be several offers on the home already, particularly if it’s a nice home, priced right (meaning the Listing Agent knows what they’re doing). The same holds true for when you actually went to see a home and you really love it, but you just need a few days to think about it. This is another recipe for missing out on the home you really loved as there was another Buyer who loved the same home you loved and jumped on it with their offer, so now the home is no longer available for sale. Unfortunately, this is one of the first, hard lessons learned by a Buyer trying to buy a home in a Seller’s market when they lose the home they really loved because they were asleep at the wheel. When you snooze, you’ll lose in a Seller’s Market.
Being fast, also involves demonstrating that you’ve agreed to terms of the contract that will be completed quickly and without prolonged delays. For example, if your Real Estate purchase contract has a standard time of 30 days for a loan commitment, consider cutting that in half to 15-20 days, as long as your Lender can assure you that this is possible. Or if the inspection time period standard is 10 days, consider completing your inspection in 5 days. All of these expedited times that you offer, lets the Seller know you’re serious. However, it’s critical that any shortening of time frame that you offer must be met so you’re not in default of your obligations as a Buyer. You don’t want to be in default as this will subject your escrow deposit to possibly being forfeited. I cannot provide legal advice as only a Real Estate Attorney can provide legal advice.
Be priced right on the money
Price your offer to win! Your Realtor should do a careful review of the home’s local market to determine fair value of the home and hopefully, the listing Realtor will be skilled at determining home selling prices so your offer can demonstrate that you want the home when your offer favors the list price or above. Because well priced homes can elicit multiple offers in a Seller’s market, it isn’t uncommon for a Buyer’s offer to be pushed above the list price of the home. Fair market value must be known and please know, that it’s not about taking a quick peek at Zillow for their Zestimates, as my Realtor friend Debbie Drummond will agree with me on.
Is this the time to low ball an offer on a home that you want? Not in a Seller’s Market it isn’t, as you’ll likely be competing with other Buyer’s for the home as I described above. As you recall, in a Seller’s Market the inventory is low, unable to keep up with Buyer demand, which equates to the ability to drive higher prices. If you’re financing, you’ll still need to have your Lender appraise the home’s value and if the appraisal comes in lower than the purchase price, you’ll have to go back to the Seller to advise of the appraised value. Of course, the Seller doesn’t have to accept the appraised value as they may want you to make up the difference from the appraised value and the purchase price, however, Sellers may also work with you to come to an agreement to revise the purchase price. This may mean the Seller will revise to the appraised value or they may want you to contribute towards the difference between appraised value and purchase price with the Seller also contributing by agreeing to reduce the purchase price somewhat. If no agreement is made then your escrow deposit would be refunded under the assumption that all other terms of the contract were met.
Another scenario can come into play if the home isn’t listed accurately to reflect fair market values when perhaps a listing Realtor isn’t skilled at pricing homes or perhaps has “bought the listing”. Buying the listing is when a Realtor agrees to list a home at whatever price the Seller wants simply to be able to get the listing. The Seller then realizes that after weeks and months of the home languishing on the market without a sale, they’ll likely agree to reduce the price. Unfortunately, by then, great damage has been incurred by the homeowner when their ultimate selling price is reduced had they just priced it right at the onset.
Be accurate and prompt
Accuracy and promptness of your offer is key here. Don’t think that willy-nilly will work. Every “i” must be dotted. Every “t” must be crossed. Every blank must be filled in accurately. Make sure all timelines are effective and in agreement with other timelines of the contract. Every needed addendum and disclosure must be presented. Understand, that you must adhere to all timelines too.
When inquiries are made that require your attention, you’ll want to get right on it and don’t delay. Don’t give the Sellers any reason to view you as being inattentive.
Be easy on inspection result demands
Even after you’ve won your home through the offer you presented to the home Seller, it’s no time during the home inspection to suddenly become a Buyer who says my way or the highway. By no means am I saying that you shouldn’t be concerned about the inspections results, however it’s not the time to nitpick about every little detail that may come up, as there always seems to be a lot of little things that come up during a home inspection. It’s best to try to work together with the Seller to come to a mutually agreeable arrangement for any needed repairs. Of course, if there are larger needed repairs, you can always reconsider you purchase if the Seller is being outrageous and not accommodating. Understand that the Seller could not agree to your repair requests if they knew there had been any other interested Buyers waiting in the wing. To summarize, just make sure that any repairs/adjustments that you request don’t get in the way of what you’re willing to accept to own the home.
Be your charming self
This should come easy for you right? We can all be charming. All kidding aside, if you simply tell a story about why the Seller’s home would be perfect for you it can likely pull at the Seller’s heartstrings. Tell them about you and/or your family, by all means spill your heart and soul to the Seller. Let them know why their home would be just perfect for you. Here’s a story, I’ll tell you, that worked well for one of my Seller’s:
A Buyer had viewed my Seller’s home and at the showing one of the children of the Buyer had left their doll behind. The Seller let me know and I advised the Buyer’s Agent. The Seller had received multiple offers on their home and even had one offer that was higher than the Buyer’s whose child had left the doll behind. The Sellers decided to accept the Buyer’s offer with the doll. They stated that they liked the fact that a young family would be buying their home as they had lived in the home all their lives while raising their children. An example of pulling at a Seller’s heartstrings. Does this mean that you should leave one of your children’s toys behind when viewing a home, hmmm, maybe, just maybe.
Be ready to make your meaningful escrow deposit
This goes back to being accurate and prompt above. When the contract states your escrow deposit should be made upon Seller acceptance or within 3 days or whatever the contract stipulates, make sure you adhere to the timeline. It continues to be all about being on your best behavior. Who wouldn’t be able to do that for the new home you want?! You see I noted “meaningful” too. A meaningful escrow deposit also shows you are serious about buying the Sellers home. A $1000 deposit on a $300,000 home is not meaningful. Your deposit should be more substantial with a least, 1%, and I mean at least but more is better! You can easily start with your required down payment for your specific type of financing you’re approved for or if paying cash, you’ll increase that substantially.
Be ready to start enjoying your new home
You followed the recommendations above that enable you to get the Seller to pay attention to you and your offer to buy their home. Your offer has been accepted; music to any new Buyer’s ears! Congratulations! Enjoy your new home now that you know how to buy a home in a Seller’s Market.
Real Estate article written by Lynn Pineda, a licensed Southeast Florida Real Estate Agent for 9 years. Keller Williams Coral Springs Realty. July 3, 2014. Real Estate Promises Delivered
More useful references for Home Buying:
How to Beat a Cash Real Estate Offer For The Perfect House by Bill Gassett
7 Tips to Help a Home Buyer win in a Multiple Offer Situation by Kyle Hiscock
The Devil Is in the Details: Follow These Steps for an FHA Cash Gift Down Payment by Inlanta Mortgage – Madison
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