Buying a home always has its challenges, but when you're trying to do it in a seller's market, the difficulty can reach a whole new level.
Article, Video: 4 minutes
Updated: September 5, 2024 Published: November 29, 2018
By: Robert Steen, Ph.D., CFP® Reviewed by: Editorial contributors
A seller's market is one where there are more people buying houses than houses for sale. In addition to higher prices and the need to make quicker decisions, you're likely to face stiff competition from other house hunters like you. These nine tips can help you come out on top.
Video Duration: 2 minutes 40 seconds
Buying a home can be challenging, but in a seller's market the challenge is increased. A seller's market means there are more people buying houses than houses for sale, often prompting sellers to bump up their listing price. You're also likely to face stiff competition from other house hunters like you.
Here are some tips for navigating a seller's market.
Before you start your home shopping, getting prequalified or preapproved with your lender will let you know just how much buying power you have. It also gives your bids more credibility, which helps in a competitive market. Set a firm limit on how much you are willing and able to spend. You might win the home in competitive bidding, but you'll also get years of strained budgets and financial stress, too.
Choose a sharp agent. In a seller's market, it's important to have the best players on your team. Find a real estate agent who not only has proven expertise in the neighborhoods you're interested in but is also highly responsive and efficient.
When the inventory of homes is limited, you probably can't afford to wait for the perfect house to hit the market. Don't be too choosy. For example, you can add a bathroom someday, but you can't change the home's location.
Consider new construction. You may find that new homes have more features and better pricing in these market conditions.
Keep a constant eye on new listings. Check in regularly with your agent and be quick to set up house visits. You'll need to be ready to make a fast go or no-go decision on houses you're interested in.
Don't lowball your offer. In a seller's market, if you want to be in the game, your bid should be close to if not higher than what the seller's asking. Up the ante. It's common for bidders to make earnest money deposits of 1% of the offer price along with your bid, which shows how serious your offer is. Subject to conditions, an earnest money deposit is refundable if the deal doesn't go through.
Put away your list of demands. Attaching conditions to your bid will weaken it. You should be prepared to accommodate the seller's needs, such as being flexible on the move-in date.
Finally, remember that a home decision has long-term impacts to your financial future, so don't get carried away with the pressure to buy, even in a seller's market. If your situation allows it, you might consider postponing your house purchase until the market cools down. But know that it's hard to predict when a market will shift. It could be years until conditions improve.
We hope that you found this information helpful.
For more on navigating a seller’s market, visit usaa.com/advice.
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In sports and business, it's important to have the best players on your team when facing fierce competition. In a seller's market, that means choosing a real estate agent who not only has proven expertise in the neighborhoods you're interested in, but is also highly responsive and efficient.
By getting prequalified for a mortgage before you start home shopping, you'll know how much buying power you have. Your offer may have far more credibility than competing ones where buyers didn't take this step.
When the inventory of homes is limited, you probably can't afford to wait for the perfect house to hit the market. Prepare yourself to adjust your expectations. It makes the most sense to make exceptions to your criteria for things that can be changed. For example, you can add a bathroom someday, but you can't change the home's location or lot size.
You may start your search with an intention of buying an existing home. But you may find that new homes have better pricing or availability. You may have to weigh commute time if the new construction is farther away from your work or other activities.
In a buyer's market, you might get away with taking a leisurely approach to your home search. That's not going to work in a seller's market. Keep a constant eye on new listings, and set up visits to houses you're interested in as quickly as possible. Be ready to make a quick decision so you can beat competing shoppers.
In a seller's market, submitting an offer that's well below the asking price is probably going to be a waste of time. Competing buyers often end up bidding above the initial asking price. If you want to be in the game, your bid should be close to if not higher than what the seller's asking. Talk to your real estate agent about the best pricing strategy.
If competitive bidding breaks out, it's easy to get carried away. If that happens, you may find that you not only get the home, but also years of strained budgets and financial stress, too. Before you start shopping, set a firm limit on how much you're willing — and able — to spend.
Your relative lack of power in a seller's market doesn't just affect the question of price. It carries over to every other aspect of the deal, too. Think twice before attaching conditions to your offer, such as demands for changes to the home. Likewise, it may be a bad idea to insist on contingency clauses such as your purchase depends on selling your current home first. To the contrary, you should be prepared to accommodate the seller's needs, such as being flexible on the move-in date.
If your situation allows it, you might consider postponing your home purchase until the market cools down. There are a couple of drawbacks to doing this. First, it's hard to predict when a market will shift and, depending on the economy and other factors, it could be years until conditions improve.
Finally, don't get carried away with the pressure to buy, even in a seller's market. Remember that a home decision has a long-term impact on your financial future. It may be better to let a house go than make a poor decision that's expensive to change.
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