The rise in prices of a home have been steady for many months nationwide, with an average home price of more than $230,000. The inventory of available homes is also at a low, with only a little more than 2 million homes available on the market. Along with the low availability of homes, rates for a mortgage have stayed relatively low, which provides a great incentive for the consumer to compare different rates offered by many lenders.
When in the midst of a seller’s market such as this, it all boils down to which offer the seller wants to accept. With a high demand but low supply, many homes may sit waiting for less than a day when bidding has begun. With all of this in mind, a buyer can still compete in a sellers’ market. Of course it may seem tough at first, but you can make the challenge much more surmountable by following the recommendations below.
1. Accept that the Market Favors Sellers
Accepting that the market favors the seller is an important step to take so you can better tailor your buying strategy to the current landscape. With the assistance of a real estate agent and their tools, you can make important calculations to determine what the market is like.
The first calculation tool is known as the market absorption rate calculator. This will determine the amount of time it takes to sell any homes that are on the market within an area of interest. If the number is low, then you will know that it is currently a market for sellers. The first thing the calculator tool requests is the number of homes that were bought in the previous year. The rate then gets divided into the current amount of available homes on the market.
2. Provide the Highest Offer You Can Afford
When a market is strong for the seller, it is important that the buyer makes an offer as soon as possible to prevent any interest from other buyers.
Sellers often prefer to have just a single attractive offer without needing to wait for more than one to appear. Even when buyers are plentiful and competitive, a seller is still likely to accept an early offer rather than waiting for others to come in—provided that offer is high enough. When the market favors sellers, buyers shouldn’t hold back and should instead put their best offer forward as soon as possible to beat the competition to the punch.
3. Have Your Bid Prepared
If the bid you provide does not appeal to the seller, then you need to be prepared to make the best bid that you can. At the same time, realize that it may not be the last bid you could make so it is good to be prepared.
A strategy a buyer could use is known as the escalation clause, where an extra percent can be added to maintain a high bid. This will show the seller that your interest in the property is higher than the other bids and ae able to pay the most for it.
4. No Countering
When it is a seller’s market, a counter offer goes out the window. This is why a buyer needs to ensure that the offer they provide will be able to catch the attention of the seller the first time. The seller will likely see multiple offers, so they will not need to see a counter when they will be able to decide on the offers they currently have.
5. Show them the Money
By showing the seller cash, you are expressing your seriousness—and when it comes to earnest, that makes a big difference. Plus, it is a good way to show faith throughout the entire process from start to closing. Find out what the earnest rate is in the area you wish to live in and add an additional $5,000-$10,000 to it.
Even under the difficult conditions of a seller’s market, a buyer can still find success by understanding the market conditions and getting in a high bid early on. Through early preparation with an agent and quick, decisive action, you can outcompete the oversaturation of buyers and close the deal on that coveted dream home!