In May 2021, the average number of days a home for sale spent on the market reached 17 days — a historic low. This is one of the many indicators that has positioned 2021’s real estate market to favor sellers. Today’s homebuyers should be referencing tips for buying in a sellers market to maximize their investments and enhance their transaction experience.
Keep these best practices in mind when buying in a seller’s market to strategically navigate your deal.
#1. Reference Local Market Reports
It’s always critical to guide your real estate transaction with local and current data (here are reports for some common areas: Los Angeles, San Jose, Austin, Denver). But, buying in a sellers market makes market reports even more important especially since real estate conditions are always local.
Reliable market reports recapping the recent sales activity in your target neighborhood can be used to form data-backed strategies and plans. Buyers will be able to gauge competition and buying activity, as well as the average selling prices and days on the market. All of this information can be used as indicators to help buyers anticipate what to expect when they move forward with their purchase.
For example, the National Association of REALTORS® reported that homes sold in February 2021 received four offers. Buyers who know this information ahead of time can spend time strengthening their offers to drive the most impact according to the market conditions.
#2. Get Pre Approved on Your Mortgage
Getting pre-approved on your mortgage is another important preparation that buyers should take when buying in a sellers market. While mortgage pre-approval may not guarantee the full scope of your financing, it does demonstrate to sellers that you are further along in the buying process than a competitor who hasn’t been pre-approved yet.
Mortgage pre-approval can also help you understand how much you can actually afford to pay for your home after the entire mortgage bundle is created, including interest, fees, and insurance.
#3. Prepare Escrow Money to Strengthen Your Offer
When making an offer on a home in a seller’s market, always have escrow money prepared. Escrow money, sometimes called earnest money, is a deposit that the buyer gives the seller when they make their initial offer. Escrow is intended to show the seller that a buyer is serious about the purchase and has the financial backing to invest in the transaction.
An escrow clause is typically included in the offer, outlining what happens to the money when the terms are met or defaulted on. In most cases, the agreement states that the seller holds onto the escrow money. If the deal falls through, the seller keeps the deposit. If the sale closes successfully, the buyer’s escrow money is applied to their down payment.
This shapes an attractive offer since sellers will feel confident that the buyer will not back out of the deal, as they have something invested in the transaction.
#4. Negotiate on Contingencies Where It Makes Sense
Some sellers will be looking for an easy deal. When buying in a seller’s market, it can be advantageous to be open to negotiation regarding the contract’s contingencies.
Contingencies are a set of agreed-upon clauses that need to be met for the transaction to progress and finalize. When shopping in a seller’s market where the seller is receiving multiple offers, being lenient regarding the contingencies may make your offer more attractive.
Always consult a professional before you decide to remove contingencies to ensure that it is a wise long-term investment decision. Buyers never want to be accommodating just to lock in the deal only to be left with necessary repairs and issues down the line.
#5. Ask About Seller Timelines
Sellers may be working on a strict schedule, whether it is immediate or far out. Buyers who have flexible time frames can use this to their advantage by offering to accommodate the seller’s needs. Getting in touch with your seller’s representative and inquiring about their ideal closing date will reveal if any pressing schedules are driving the seller’s decision.
Being able to leverage that to your advantage may elevate your offer over the competition.
#6. Work With an Agent with Experience Buying in a Sellers Market
The best advantage when buying in a sellers market is an experienced, talented, and professional real estate agent. Working with the best agent in your area gives you access to their expertise, network of connections, and negotiation skills. All of these assets and more are essential tools for purchasing a home in a seller’s market as they streamline the experience and mitigate the risks.
If you’re ready to buy a home and are looking for a great agent to assist you, visit our website to get connected with the perfect professional for you.