Buying in a Seller’s Market – The 2021 Guide for Home Buying
The COVID-19 pandemic ruined many things around the world. But there’s one thing that improved — mortgage interest rates. Right now, interest rates are at historic lows and people are finding it easier than ever to qualify for a mortgage. However, with so many buyers flooding the market, more people are trying to buy than there are houses available which leads to a seller’s market.
This creates what is known as a seller’s market, meaning sellers have more bargaining power when it comes to selling their homes. Let’s unpack the seller’s market of 2021.
- Seller’s market = Demand exceeds supply
- Be ready — Remove barriers to your move
- Get approved and make strong offers
- Work with an aggressive, professional realtor
What Is a Seller’s Market?
This is a marketplace where the demand for housing exceeds the available supply. It is mathematically defined as a market where there are less than five months of available supply on the market. This means that if everyone stopped placing new homes for sale, it would take five months to sell out the remaining/existing inventory.
What Is a Buyer’s Market?
A buyer’s market is defined as an environment where supply exceeds demand and there are more than seven months of available supply listed for sale. In this market, buyers have more power to negotiate on the sales price and other purchase conditions since there aren’t as many people trying to buy homes. With the current market conditions, most experts aren’t sure when we’ll see a buyer’s market again.
Facing the Current Seller’s Market
In a perfect world, none of us would need to buy a home in a seller’s market, where housing supply is low, and the sellers tend to hold more cards at the negotiation table. Unfortunately, the world is not a perfect place. Life happens. Jobs shift and change, children grow and leave the nest, communities shift and change along with our needs for a home. So, inevitably, you may find yourself in the position of needing to make a move during a low-supply/high-demand seller’s market.
Here are our 10 tips for buying in the 2021 seller’s market.
10 Tips for Buying in a Seller’s Market
Be ready to move quickly
Speed and clarity are powerful tools in this situation. You need to be more flexible than the other buyers who are out looking. This is about having the right mindset as well as having your financial ducks in a row. If you find a home that you love, be prepared to put in an offer immediately.
Know what you want
It is critical that you have a clear and defined list of your housing needs before beginning the active search for a property. In the current housing market, homes can have multiple offers within hours of being listed. If you know what you want in your future home, you can put in an offer more quickly.
Why do you want it?
Understanding the true motivation behind your housing needs will assist you in finding alternatives and thinking strategically when it comes time to make an offer.
Get approved for financing
The last thing you want is to lose out on the home of your dreams because you did not have financing set up and the seller went with another offer while you scrambled at the last minute. Regardless of whether you’re purchasing a home in a buyer’s or seller’s market, we recommend always having your financing in order before you even start to look at homes.
Shop in your price range
Don’t look at a property with the assumption that you can “talk the seller down” on their price. In a seller’s market, that won’t happen. Look for homes in the price range you qualified for — another plug for getting pre-approved financing! You can also shop for less than what you qualified for, to secure smaller monthly payments.
Make strong offers with few contingencies
You can “clean up” an offer and put yourself ahead of the competition by removing barriers for the seller and reducing fear from the transaction. If two prospective buyers come in with the same price offer but one has purchase conditions in the contract, sellers are more likely to choose the offer with no contingencies. That isn’t to say you can’t ask for certain conditions, but the fewer you have, the more enticing your offer will be to the seller.
Use an escalation clause
Don’t know what that is? Contact one of our licensed Real Estate Advisors to find out. Hint — this clause may help you come out on top in the event of a bidding war. We highly recommend prospective buyers add this clause to their purchase offer.
Focus on the long term
Sometimes it can be frustrating to buy in a market that you do not control. It is easy to let fear take over and start wondering if you are buying into a bubble or making a bad decision. As with any housing move, it is all about the long-term perspective. If you are buying the home for the right reasons, the home satisfies all your needs, and it is in your price range, then you are set up for success.
Write a letter to the seller who is receiving your offer
This is one of those very simple “tricks of the trade” that goes a long way. A personal letter to the seller, along with your strong offer, makes a compelling and personal case for why their home is perfect for you. Sellers are people, too, and it is surprising how much they can be swayed by a genuine personal touch. In a seller’s market, many prospective buyers may write letters as well, so make sure there is enough personality in your letter to possibly sway the seller.
Work with an aggressive and professional realtor
The right real estate advisor can set you up for success with knowledge of homes that have yet to hit the market, assisting you with making rapid decisions, structuring an offer so that it is likely to be accepted, and giving you priceless counsel in what can be (but doesn’t have to be) a stressful process. With so many buyers looking for homes in the current seller’s market, your realtor can help you make aggressive moves to land the home of your dreams.
Are You Ready to Face the 2021 Seller’s Market?
We understand that even the thought of buying a home in the current market can feel overwhelming and daunting. At Amherst Madison, we want to make the home-buying process as easy as possible for you and help you feel empowered as you enter the seller’s market.
I hope this list has been helpful to you. Should you, or anyone that you know, have any questions related to this post, please do not hesitate to reach out via phone, email, or text. We are passionate about helping others along their real estate journey.
– Nick Schlekeway