One of the more unexpected outcomes of 2020? Finding ourselves in a seller’s real estate market. Across the country, home inventory is low, which is amazing for real estate agents and sellers, but less so for eager buyers. Bidding wars are getting intense, and houses are selling within days of being on the market. All of this is making home buying more stressful than typically is and it’s enough to make any buyer’s head spin. If you’re considering buying a home right now, you may find yourself intimidated by buying a house in a seller’s market.
A seller’s market occurs when there are more people looking to buy homes than there are houses for sale. This increased demand can lead to higher home prices, bidding wars and houses selling so fast that buyers need to make quick decisions.
To help you gain some insight into what it’s like to buy a home right now, and how to feel comfortable during the process, we spoke with Flyhomes Chief Operating Officer Ryan Dibble for his top tips on what to do when you want to buy a home during a seller’s market.
According to Dibble, home prices are always higher in the hottest neighborhoods. He recommends going a little farther from the most popular neighborhoods in your target area, as doing so usually gets you more square footage and better amenities for less money. Dibble noted that many buyers don’t give great neighborhoods a chance, simply because they aren’t the hot neighborhood at the moment.
To make your bid stand out among multiple competitors, Dibble suggests planning your offer around the seller’s priorities, which may not always be price. He feels this is usually the best strategy for getting your offer accepted.
“Sometimes that is all about price, but sometimes it isn’t,” Dibble said.
You may win on other contingencies or conveniences for the seller. One option homebuyers have to make their application more competitive, is to allow the seller to do a rent back. Making their move easier and less stressful can go a long way.
Another strategy that can win over sellers is to waive contingencies. These provide the buyer protection from things going wrong, but at the same time add uncertainty for the seller. Removing contingencies strengthens your offer, even if it isn’t the highest one on the table.
While most people can’t afford to make a cash offer on a home, it may provide some extra leverage. Sellers prefer cash offers because they close faster and eliminate the risk of the mortgage not getting funded. Cash offers give buyers much more negotiating power, helping them to save thousands on the transaction.
“Yes, it’s true that very few homebuyers have the capital to do this on their own. However, like every other industry in the past decade, real estate has seen a host of new companies innovating the home buying process,” Dibble said.
Before you start house hunting, Dibble suggests writing your goals down, grounding yourself, and coming back to those goals on a regular basis.
“The most successful homebuyers are intentional about what they want, but they are open to learning and make adjustments accordingly,” Dibble said. “When buying a home, sometimes you’re buying an asset, and sometimes you’re buying a lifestyle. Either way, knowing your goals will help you decide what to invest in and what to avoid.”
If you’re buying with a partner, determining what your goals are together before you meet with a real estate agent can lead to a more effective and efficient home buying process.
“It’s a much harder conversation to have at an open house or in front of your mortgage lender,” Dibble said.
If you’re set on finding your dream home, Dibble believes that understanding your goals is the key to success.
“Know the difference between a dream home and the dream of owning a home you love,” Dibble said. He noted that it’s okay to be aware of things you’ll likely want to change when you can, like a kitchen renovation or an extra bathroom, but that you should prioritize the wish list items that you can’t change, like the neighborhood or the amount of yard space.
One common mistake Dibble sees buyers make in any market, is failing to stay open. Dibble explained that if you’ve been looking for a home for three months and have not found anything, you may need to revisit your goals and adjust them. Sit back down with your written goals and consider which ones you will not budge on and which ones you’re willing to adjust to find a home. Keep in mind that your agent has a lot of experience you can learn from and stay open to their feedback. “This doesn’t mean you will always agree with them, but you can leverage their experience to reassess your goals and ultimately find a home that fits your needs,” Dibble said.
The hustle and bustle of a seller’s market can make the home buying process even more stressful than it already is. If you’re worried about a rushed decision leading to buyer’s remorse, Dibble recommends taking the following steps.
- Make room to bid up. A 2020 survey found that 40% of first-time homebuyers spent more than they expected to. Don’t spend time looking at properties that will end up selling for more than you budgeted for. As you’re getting a sense of what you can afford, search well below your maximum so you can comfortably bid up. For instance, if your budget is $750,000, start your search at $625,000 to leave room for negotiation.
- Have absolute confidence in your budget. Get underwriting preapproval so you’ll have all of the loan process completed upfront and you’ll know exactly what your budget is. That information can reduce stress and helps you and your agent create the best negotiation strategy.
- What’s outside the house matters as much as what’s inside. About 1 in 5 home buyers reported being unhappy with their home’s location, which unfortunately is something you can’t change about a home. Identify your dream neighborhood, then widen the circle. Take the time to explore every neighborhood you’re considering in person and think about your neighborhood must-haves like good schools or walkability.
According to Dibble, even if you do all of the above, buyer’s remorse is normal. “The good news is that it passes for most people within six months,” Dibble said. “Picture yourself living in the home three years from now. Generate good vibes about your future in the home.” That feeling you overpaid by $10,000 may be all in your head, and Dibble believes it won’t matter much in three years when you’ve made the house your home.
At the end of the day, only you can decide if you’re ready to buy a home. A seller’s market shouldn’t necessarily discourage you, but it is understandable if you want to wait until the market cools down a bit. Hopefully, these tips will help you make the right decision for you!
In the meantime, if you want to save more money for a downpayment, Tally is here to help you pay off your credit card debt faster!