You are searching for your dream home and you notice you are having a tough time nailing down a deal. Every home you visit seems to always have multiple offers and even the homes you find unattractive do not stay on the market long. When you think about it, you realize there is not much to choose from when it comes to inventory. These could be signs you are in a home seller’s market. But, let’s discuss the three main indicators of a seller’s market so you can be certain. Then we will talk about how to navigate a seller’s market when searching for your dream home.
When researching the housing market, you should first ask:
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How many days are homes staying on the market?
When homes are selling quickly on the market such as less than 15 days, this is an indicator of a seller’s market. You can Google search the term “average days on market by (desired zip code)” to find online tools that will tell you how long homes in that area are staying on the housing market. Another great way to find how homes are selling in your desired location is to contact a realtor who services that area. They will be able to provide you insight on how quickly homes are selling and what you can do to stand out as a serious buyer.
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How much are homes selling for compared to the asking price?
When researching the area where you want to move to, you should try to answer the question above. If you find homes are selling for the same as the asking price or even more this is a huge indicator that you are in a seller’s market. Online research is a way to find how much homes are selling for compared to asking price or you can just talk to a realtor and they’ll do all the research for you.
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Are Home prices increasing?
If the answer is yes, then this is an indicator you are in a seller’s market. Especially if homes are still selling quickly. Low housing inventory can cause home prices to increase with home buyer demand. This means home prices may continue to rise into the unforeseeable future or until new home construction can meet the demand. Which will be when? So, waiting for house prices to fall may not be the best option. It is best to contact a realtor that serves your dream community to help you find the best deal now before home prices increase again.
Okay, so after you’ve done some research and you have found you are in a seller’s market. The good news is you can still find a great deal on a home. You just have to know how or hire a realtor who does. Either way, you should follow these steps below when navigating the seller’s market to buy a home.
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Get A Mortgage Pre-Approval Letter First (If you are not a cash buyer)
You shouldn’t begin your home search without knowing how much home you can buy. Sure, you will have other home buyers out there who are not cash buyers, looking for a home before they are pre-approved for a mortgage. You want to stand out among the competition for your dream home. A mortgage pre-approval letter will help you tremendously in a seller’s market. Especially since you will be letting sellers know you are serious about buying a home.
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Always Be Ready to View a Home
When house hunting in a seller’s market, you should take advantage of having a cell phone and if you are one of the few that does not have one, now is the time to get one. If the home seller or your realtor is returning your call, missing it may mean missing out on an opportunity to view the home or to make an offer before someone else does.
This also ties into not treating home hunting as just a weekend activity. In a seller’s market competition is fierce to buy a home, so you want to be aggressive in your home search. Taking at least one hour a day to search for a home will go a long way.
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Increase Your Earnest Money Deposit
When you do find your dream home, now isn’t the time to offer low offers to sellers. In fact, now is the time to offer a higher than average amount in earnest money. Typically, buyers place 1% to 2% of the total home purchase price in escrow as earnest money. In a seller’s market, it is not unusual to go beyond 2%.
A large earnest money deposit can separate you from the competition. It can also persuade the seller to negotiate the purchase price since you demonstrated you are a serious buyer.
Still, you must make sure the deposit is not above your means. Closing on a home can take longer than 30 days and this means you will not have access to the money during this time. Also, while it is tempting to waive contingencies in the offer letter, it is recommended to ask your realtor first before you do this. You may end up losing your earnest money or paying a lot more than the home is worth if you waive contingencies and then something unplanned happens.
