A hot real estate market means low inventory, fierce competition, and emotional rollercoaster rides for buyers. Even though buying a home in a seller’s market presents additional challenges, it’s still possible to get your offer accepted on a place you’ll love.
What Defines a Hot Market in Real Estate?
A hot housing market happens when there are more buyers out there than houses — aka the demand is high and the supply is low. As a rule of thumb, an inventory level of six months is considered balanced between buyers and sellers. Less is a seller’s market; more favors buyers.
8 Tips for Buyers in a Seller’s Market
In a hot seller’s market, you don’t have time to waste. Follow these tips to get your dream home — with less stress — even in the hottest markets.
Do Your Homework
Start with getting the lay of the land. Check out what homes are for sale in your area. Here are a few ways to learn more about the types of homes available:
- Drive through neighborhoods you are interested in and take time to walk around them.
- Keep an eye out for “coming soon” properties.
- Go online and view your favorite real estate websites to find new listings.
- Narrow your options fast with virtual house tours.
- Take advantage of self-tour options when available.
Following these tips will help you narrow down the things you do and don’t like, and get a better idea of what features and locations matter to you and your family.
Understanding the current market trends is key to a successful home purchase. Look online at recently sold homes to compare the listing and selling prices. Get a good sense of how hot your local market is without feeling hurried to make an offer. You’re going to need to find out how long homes are listed before they go under contract so you know how fast you’ll have to act. When the market is hot, you’ll need to move quickly!
Find the Right Real Estate Agent
Hiring a professional real estate agent when buying or selling a home can help you make smart decisions and avoid costly mistakes. Great agents will alert you to listings as soon as they hit the market, if not beforehand. They also know how to make their client’s offer stand out from the rest. Never underestimate the importance or value of having a great buyer’s agent working for you — especially in a hot market.
Ask people you know for referrals to find several prospective agents. Research their online profiles and websites, and get a good understanding of what they specialize in and their experience. Don’t forget to check out customer reviews. Once you’ve narrowed down your choices, interview at least three agents. Choose one who will best represent you through the entire home buying process and whose working style clicks with yours.
Prepare to Compromise
Striving to find the perfect house in a hot market could leave you empty-handed. If there aren’t many homes available that match your requirements, consider adjusting your expectations to increase your options. Could a “good enough” home still work for you?
When you’re house hunting, it’s easy to envision your dream home early on. But after you’ve made your way through many houses, it’s common to realize that you may have to make some compromises. Buying a home that is “good enough” and doesn’t break your budget can help lay a solid foundation for achieving many dreams. This can also be a sounder strategy, particularly if you are anxious to become homeowners.
Get Pre-Approved for Your Mortgage
Pre-approvals don’t happen overnight. Verification of all your financial information can take lenders a few days or a few weeks. It’s advisable to start your process by getting your pre-approval secured so you are in the driver’s seat when the time comes to make an offer on a home. Compare mortgage interest rates from several lenders and get preapprovals from two or three lenders. Comparing interest rates and costs with Official Loan Estimates will help you get the best deal.
Houses tend to disappear from the market fast these days. Buyers need to make sure they have an offer ready as soon as they find a dream home. Presenting a pre-approval letter with your offer demonstrates that you are financially able to buy the home. This puts you in the fast lane and proves your commitment to real estate agents and sellers in a hot market.
Initiate a Rock-Solid Closing
Show sellers that you can close the deal without a shadow of a doubt — especially if you are competing with multiple offers or cash offers. Use your pre-approval to your advantage by clarifying your creditworthiness. A larger down payment can also be attractive to sellers.
Have your agent communicate with the listing agent to uncover what the seller’s needs are, especially when it comes to possession terms. Perhaps they need to rent back for a period of time, or they might be looking for a fast closing. Knowing their motivations will help you in your negotiations, and help you provide a solution that works for both parties.
Simplify the Home Inspection Process
You may be tempted to waive the home inspection — especially in a hot market. Not so fast! A thorough home inspection can reveal critical information about the condition of a home and its systems. You want to be aware of any repairs, maintenance and costs involved that are necessary for the short and long term. Worst-case scenario, you want to be able to back out of the contract should any major issues come to light (like dry rot or structural damage).
Plan for a standard home inspection and specify that it’s just for information only. Let them know as long as there are only normal wear and tear or cosmetic items found with the home, you will move forward with the agreement. Another approach would be to set a threshold for repairs so the sellers know you don’t plan to nickel and dime them for minor issues.
Sweeten the Deal
Here are a few tips to make your offer more enticing to sellers:
- Reduce or remove contingencies (keep it simple!).
- If there are multiple offers, consider adding an escalation clause (this states that the prospective buyer is willing to raise their offer, should the seller receive a higher competing offer).
- Adjust the closing timeline to meet the seller’s needs.
- Offer a rent-back agreement to the seller.
- Amp up your offer by increasing your earnest money.
- Write a letter to the seller.
It’s Worth the Wait
Buying a home in a hot real estate market takes patience and perseverance. If you’ve been searching for a while, or have lost out on several homes, you may be thinking of making a bid out of desperation or even giving up. Don’t do either!
Putting in an offer that’s too high or on a home that’s not really what you are looking for, can leave you angry or put you in a financial squeeze. Giving up may leave you stuck with renting. But on the flip side, taking your time can also allow you more time to save more for your down payment, raise your credit score and polish your home buying wish list.
Feeling frustrated? You’re not alone. Rather than worrying about how hot the market is, suggests you focus on what you can control. Understand what a reasonable offer is in your market, limit your contingencies to what’s crucial, and have your financing ready. That will ensure you’re prepared for when the right house comes along — and you’ll be ready to make a strong offer.
Boundary Title Helps You Control the Course of Your Home Buying Experience
Buying a home in a seller’s market doesn’t have to be stressful. Put yourself in the best possible position to increase your chances of getting what you want by following the tips above. In addition to your real estate agent, Boundary Title & Escrow can help guide you through each step. And when you find your ideal house, you’ll be confident that you’ve done everything you can to get the edge on the competition. Contact us today!
This material is provided as a courtesy and for educational purposes only. Please consult your title professional for specific information regarding your situation.