So, what exactly is a seller’s market? A seller’s market is simply a matter of economics 101, supply and demand. The supply of homes available is low and the demand is high. As a result, some homes wind up being on the market for just a few hours before going under contract.
You may find yourself asking “Should I buy in a seller’s market?” While the process may seem daunting, our team at Southern Trust Mortgage knows what it takes to successfully navigate the process of buying in a seller’s market and have compiled that knowledge into 5 useful tips for new and experienced homebuyers.
1. Get ahead of your competition.
Imagine: you’re on the quest for your dream home. You spend hours scrolling through the same listings until suddenly, that very home pops up! You get pre-approved for a loan and put an offer in only to find out that you were out bid by one of the other handful of people vying for your dream home. Sound familiar?
This is unfortunately a common reality for most homebuyers shopping in a seller’s market. No matter where you live, inventory for homes in popular locations is often scarce. When these homes do hit the market, they typically don’t remain for very long and you are often one of many people putting in an offer on a home. Therefore, if you have your sights set on certain criteria such as location, starting your house search as soon as possible and staying ahead of your competition is essential.
Once you find a home that you are seriously interested in, you should find out as much as you can about the property before putting in an offer. Things such as disclosures, property reports, offer due dates, or even just talking to the neighbors will be extremely helpful in determining whether or not the property will be a good fit for you and your family.
Similarly, you will also want to make sure your credit score and finances are top notch before applying for your mortgage loan. To make sure you can get the best mortgage rate possible, take the necessary time to improve your credit score and save up a larger-sized down payment first.
2. Have your proof of funds and loan pre-approval ready.
In order for you to be ready to put an offer in when you find the property you want, it is crucial to have any supplemental paperwork such as a mortgage pre-approval and proof of funds for your down payment ready to go ahead of time.
As we have already discussed, competition for homes in a seller’s market is fierce. Because of this, you’ll want to have the strongest offer you possibly can in hand. You might want to consider having your mortgage loan completely verified and approved, rather than going in with a simple pre-approval, as proof of an actual loan carries more weight in the eyes of the seller.
Bearing this in mind, we at Southern Trust Mortgage developed a Priority Approval program for prospective homebuyers, where you can get complete approval of your mortgage loan in 24 hours or less. All of which can be done at your fingertips through our mobile app, STM Connect. Our priority approval program is beneficial and unique because:
- It is more than just a pre-qualification
- It instills immediate confidence in our partners and buyers
Always assume that a home you’re interested in has many strong offers. Anticipating a bidding war on a property and effectively planning for that can help you come out on top in the end.
3. Try to impress your sellers by beefing up your offer.
Simply put, money talks. But so does:
- An offer letter
- A personal appeal like a photograph of your family, etc.
- Putting down a larger earnest money deposit
- Being flexible with your closing date
- Considering waiving contingencies
- Including due diligence fees
In a seller’s market, adequately priced properties typically receive multiple offers and can wind up triggering bidding wars. Because the seller is often likely to consider only the highest, cleanest offers, buyers should consider the listing price as the starting point and aim to bid slightly above the listed price to give them a leg up against their competition.
Additionally, many first-time and even seasoned homebuyers can forget the personal element of purchasing real estate in a seller’s market and tend to focus solely on the amount they can offer. Submitting a great, solid offer is more than simply a numbers game, and if the competition is tough you may want to consider doing one, or more, of the above.
4. Look for properties priced 10%-20% under your budget
This point goes hand-in-hand with beefing up your offer and trying to impress your sellers. Often times when the market is hot, bidding wars may break out on a property. This means several potential buyers are offering over asking price for the home.
If you are not prepared to offer over the listing price due to budget constraints, a good rule of thumb is to look for properties priced 10%-20% under your budget. This will give you extra room to offer above the listing price (and stay a solid contender in the case of a bidding war) all while staying within your ideal budget.
5. Stay vigilant, and keep your eyes peeled.
Let’s face it, a seller’s market is no walk in the park. In a buyer’s market, you may be able to adopt a relaxed and unhurried mindset when searching for your dream home. However, that mindset will not work in a seller’s market. Try to keep a watchful eye on any new listings and set up viewings to homes that you are interested in as quickly as you can. Make sure you are prepared to make a decision at the drop of a hat so you can stay ahead of your fellow buyers.
Finally, while it may be a seller’s market, finding an affordable home is still very much possible. With the right amount of preparation, vigilance (and maybe a dash of luck), you’ll be ready to land the home of your dreams!
Ready to get started? Find a Southern Trust Loan Officer in your area to discuss your options!