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Buying a Home in a Seller’s Market
You’ve made the decision to buy a new home. Or maybe this is your first time. You’re probably excited and can’t wait to go house hunting. If the market is a “Buyer’s Market,” one in which supply exceeds demand, you’ll have plenty of time to get your financing in order and look at as many homes as you like.
But what if demand is high and supply is low? Then you’re in a “Seller’s Market.” During a seller’s market, homes sell almost as soon as they become available, often causing buyers to have bidding wars with each other. They attempt to outbid the other buyers, offering the seller more than the seller is asking.
When you find a home you love, you’ll need to act fast. Sellers don’t want to wait for buyers who are still working on their financing. Before you start looking at homes, take care of two things first:
- Get preapproved for a mortgage – Show the seller you have your mortgage approved and you’re immediately ready to close on the offer. Offers without a mortgage contingency will jump to the head of the line.
- Get your down payment ready – Have paperwork showing you have proof of funds. Although not always required, having a 20 percent down payment available could make the difference in whether your offer receives consideration in a competitive market.
By getting pre-approved for your mortgage, you’ll know exactly how much house you can afford as well as get a head start on most of the other buyers. Also, since you will know the maximum that you can afford, you will be able to save time by searching only for those houses in your price range. Don’t even try offering less than the listed price during a seller’s market – that will only get you kicked out of the running.
You might also consider writing an offer letter to the seller, explaining a little about yourself and why you love their house. Keep it short and simple; strive to make a personal connection to the seller, but not bore them. Your realtor can send this letter to the seller and their realtor with the formal offer.
Check with your financial institution to help you begin this mortgage journey. Talk to one of the mortgage loan officers about getting pre-approved. They will calculate how much you can afford, find the best interest rate you qualify for, and help you get to the front of the line in a Seller’s Market.