Sold house sign on house in a sellers market.
The 2020 housing market was a year of extremes. Within the span of just a few months, we saw homes bounce between hit decade highs and decade lows. Going into 2021, economists and industry players project home prices will continue rising by 5.7% in 2021 and that the seller’s market will continue for the foreseeable future.
A seller’s market is when there are more people buying houses than houses for sale. If you’re buying in a sellers market, you’ll encounter higher prices and increased competition, and be expected to make quick decisions. If you’re looking to buy right now, it may be hard to get one at a fair price. In sought after areas, houses are going under contract in a matter of days. The most desirable houses may be selling for $100,000 over listing, or even more.
So the question becomes, is this a good time to buy? According to Ryan Dibble, COO of Flyhomes, ‘The best time to buy is when you’re ready.” Below are some tips to make the process easier, quicker and help secure the right home for you.
Expand your search. Home prices are always higher in the hottest neighborhoods. Dibble recommends going a little farther away from the most popular neighborhoods. This way you can usually get more square footage and better amenities for less money. And don’t follow the hype. “We too often see people overlook beautiful neighborhoods with great schools just because they aren’t buzzy,” says Dibble.
Customize your offer to the seller. Remember that it’s not all about price. Tailoring your offer to meet the holistic “needs” of the seller is usually the best strategy for getting your offer accepted. Sometimes that is all about price, but sometimes it isn’t. You may win on other contingencies or conveniences for the seller. Dibble provides the an example of closing earlier and offering the seller a short rent back to allow them an easier move into their next home.
Don’t bother with a lowball offer. Coming in low will just waste your time. When homes are going into contract within a few days, the chances of this working in your favor are slim.
Waive the mortgage contingency. Typically the buyer has a mortgage contingency in the contract that simply allows them to back out if their mortgage isn’t approved. It protects the buyer, but adds uncertainty for the seller. Dibble says that removing contingencies strengthens your offer, even if it isn’t the highest one on the table. If you’re concerned about not getting approved, make sure you have a backup plan, such as a co-signer or higher down payment.
Make an all cash offer. 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. A full cash offer may be more attractive than a higher bid that’s mortgage dependent.
Get preapproved. When all else is equal, a seller will prefer an offer from someone who is pre-approved to minimize their risk.
Consider renting. If you still are having a tough time getting a home, a good option is to rent until you can find the right home for you. Not only does it buy you time, but you also will get a better feel for what you want to buy. After living there for a few months, you may decide that you actually want a different neighborhood or realize there are must-haves for your new home that weren’t included in your original list.
Keep in mind that a sellers market can put pressure on buyers to buy a home quickly, without being sure it’s the right one. While you can’t be leisurely with your home search during these times, be sure you think it through and do your research.