How to Buy A Home in A Seller’s Market

2016-03-26 11.26.08

Spring Market in Kirksville is in full swing, and it’s proving to be a bit of a different…uh…egg…than the last few years.

Do we know which came first: the chicken or the egg?

Perhaps this train of thought was brought on by my recent shopping experience for chickens at Tractor Supply. Or not. But I digress.

That’s the question that rattled around in my head as I debated which perspective to write this post from: sellers or buyers?

Our market is changing this year, and because it’s so early in the Spring Market 2016 season, we don’t know where it will take us. What I know for sure is that listing inventory is low, home prices will increase, and many sellers will have the opportunity to choose the strongest buyer. 

This is great news for sellers and a big difference from market conditions of much of the last decade.

What it means for buyers is that you’re going to have to take a different strategy if you want to be successful. And by successful, of course, I mean in getting a property under contract.

1. Think Like A Seller.

In a seller’s market, you need to assume that you WILL have competition for a property. You don’t even need to know anything about specific buyers or terms of an offer to do this, because all buyers will have certain characteristics that will define the strength of their purchasing ability.

Think about it. If you’re a seller, what do you want? You want a fair price, you want to sell it to a buyer who’s qualified to purchase it with as little hassle as possible.

So to get that done, you want to make sure you choose the strongest buyer: the buyer who has the best opportunity to close the deal, right?

Hands down, the strongest buyer is a cash buyer, especially one with a short closing time.

That doesn’t mean that the seller will automatically choose the cash buyer every time, because there are other factors involved and people are, of course, all different.

In today’s world, buying a home is the largest purchase most people will make. And most of us finance our properties, so it’s very common place.

Buyers with conventional loans, or those requiring a down payment of up to 20%, is typically perceived by sellers to be the most solid of the financed buyers.

And of course last but not least are the buyers who are getting government loans, such as the no-down payment loans that many first-time home buyers will get. Will a property need repairs? What will buyers ask for during the inspections? All these are huge unknowns for sellers.

2. So, Get Your Financing In Place.

Before you even start looking at properties, visit your lender to get a pre-approval or pre-qualification letter.

I HATE it when buyers start looking before they’ve been to the lender. Because that usually means they are going to end up being disappointed once they find out they were looking in the wrong price range.

Go to your lender like, yesterday. At the very minimum, get a Pre-Approval letter from them, which will tell you what price range you should be looking in. And make sure you know when that letter expires, because most of them do.

While most agents have been encouraging buyers in recent years to get pre-approved, in today’s market, it’s a necessity. It’s going to be the difference between having your offered considered…or not.

3. Be Willing To Compromise On Your Priorities

Keep an open mind. Fewer properties on the market means there might not be a property which means ALL your criteria. What do you HAVE to have? What can you live without?

Do you really need that 4th bedroom simply to use as an office, or can you set up an office elsewhere in the home? Do you HAVE to have a 2-car garage? Perhaps you sacrifice the 2-car garage for a second bathroom.  Can you sacrifice the stainless steel appliances in order to get a more spacious, affordable property that you can modify later?

It often pays off to make a short-term sacrifice in order to get ahead long term. Consider looking beyond the cosmetic improvements a property needs, and making your own improvements over time.

For instance, it appears this season that homes on a small acreage is the darling. If you’re a first-time home buyer, are you in a position to be competitive? Maybe your best option is to instead look for a good, solid home with great re-sale potential until the market adjusts to a more affordable level for what you want.

Everything goes in cycles.

4. Bring Your Best Offer.

If you’re interested in a property which has multiple offers coming, it’s no time to make a low ball offer. You want your offer to stand out and be noticed! You want the seller to pick YOU to negotiate with. You need to get their attention.

You need to Bring. It.

If it is not a multiple offer situation, then make a thoughtful, well-justified offer. I never recommend low ball offers, as all they do is anger the seller. There are still many people out there who are still under the impression that they get a better deal. I can’t say that I’ve seen it, but to each his own.

5. Be A Buyer Who’s Great to Work With. 

Excitement, enthusiasm and sharing your love for the property will gain the support of the sellers, encouraging them to be in your corner. We all like happy endings, and sellers are no different.

Be gracious. Be thoughtful. Be respectful. You attract more bees with honey. 🙂

Disclaimer: This post is a cumulative expression of real estate experiences in my career, shared by colleagues, and knowledge gained through reading trade material through various sources. Any similarity to current or specific buyers is purely coincidental and unintended.