You’ve likely heard about the dreaded “seller’s market” if you’ve shopped for a home recently.
In a seller’s market, homes sell faster than ever, and homebuyers have more competition and less time to find their home.
As of May 2022, a typical home spends 31 days on the market, which is six days less than at the same time last year. This means that demand is high and the market is competitive.
If homebuyers in a seller’s market want to find a new property without compromising their budgets or standards, then read on for our tips.
What is a seller’s market?
Any marketplace is all about supply and demand and the housing market is no different.
A seller’s market happens when the housing demand exceeds supply. This means that sellers can potentially make more than their asking price on a home and set contingencies.
In a buyer’s market, however, the situation is reversed. There’s more housing inventory than buyers, so interested home buyers have more to choose from and more room to negotiate.
But a seller’s market does not mean buyers should give up on the hunt. Instead, a seller’s market might just mean high home prices, bidding wars, and accepting certain compromises on your wish list.
With an experienced loan officer, you still have the opportunity to find the best home for you without compromising your needs or budget.
Should I buy a home in a seller’s market?
As with any major purchase, your personal and financial situation will likely be the biggest consideration in your decision to buy a house. Especially for first-time homebuyers. But there’s also the question of timing in the housing market.
For example, real estate market conditions and the economy overall will be a factor in your decision. When the market shifts to the seller’s favor, you need to know what that means if you want to become a homeowner.
Take a look at the local inventory and the home prices of houses that are similar to what you’re looking for. Figure out the top of your budget and what your dealbreakers are.
How much additional cash are you willing to spend for your dream home? Do you have the finances to offer above the asking price?
To give yourself the best chance, employ these tips from experts in the mortgage industry.
6 home buying tips in a seller’s market
The first thing you have to realize if you want to buy in a seller’s market is that time management is crucial. The following tips should be done in any market condition, but are especially important in a market where sellers are seeing multiple offers.
1. Check your credit reports
Before you do anything else, you must understand where your credit stands and why. Request your free credit reports from the three agencies that monitor everyone’s credit scores—Equifax, TransUnion, and Experian. This step, ideally, should be done up to a year before you think you might buy a new home.
Once you have your reports, search for any errors (for example, showing active debts that are paid off), past-due accounts, or accounts that have been transferred to collection agencies. These are liabilities to you if you’re seeking new credit, especially for a large purchase like a home—and especially in a competitive market.
2. Correct credit issues and monitor your credit score
Credit is a big factor for mortgage lenders when you for a mortgage or preapproval.
Once you’ve seen your report, work to clean up any errors and work on areas that need improvement. Make sure to dispute any errors on your report with the credit agency.
The other half of the plan is to make sure you don’t run up any new debts and, of course, make your payments on time. Late payments will reflect negatively on your credit score and the debt itself.
You can download an app, such as Credit Karma, to monitor your credit activity and make sure nothing is being applied for in your name.
3. Decide on wants vs needs
When you’re purchasing a home in a seller’s market, asking for contingencies, special considerations, or concessions can be a mistake.
Some of these requests may be necessary for you to buy the house, and that’s fine. But make sure you know what’s necessary and what would be “nice to have.” Whatever you ask for, know that it might cost you the house.
A home inspection contingency, however, is not something to compromise on. Even in a seller’s market, you don’t want to throw money away into something that’s not safe.Check your mortgage options
4. Patience is a virtue
Homebuyers in a seller’s market might mean you lose out on a possible house or two.
Unless you have an unusual edge, like a cash offer or a personal relationship with the seller, you could miss out on the first or second house you want.
Frustration can make interested buyers bid more than the house is worth or give up trying to buy altogether. Both can be costly mistakes.
5. Make sure your real estate agent knows your minimum standards
Despite the tip above, compromising too far is an even bigger mistake.
With a reduced supply of homes available on the market, your real estate agent may show you something that ultimately doesn’t fit what you need. And losing a bidding war could make you consider lowering your standards below an acceptable level.
Remember, real estate purchases are huge investments—likely the biggest you’ll ever make in your lifetime.
Resolve not to buy anything until your absolute basic needs are met. You want to be confident in your purchase.
6. Mortgage preapproval is essential for home buyers
Every home buyer, in any market condition, should get preapproval from their lender.
A preapproval letter has the weight behind it to give you a possible edge over other buyers.
It shows sellers that you’re serious about buying and have the financing to do so. In a seller’s market, they can afford to choose the buyer who has a letter over those who don’t.
What should homebuyers do in seller’s markets?
The secret of homebuying is that there is rarely ever the “perfect” time to buy a home.
If you wait for perfect market conditions, you may be waiting a long time. Consider your own financial situation and needs first.
Homebuyers shouldn’t be discouraged from trying to find the right home in a seller’s market.
GoMortgage has the answers and the experience needed to navigate the home buying process in a competitive market and find you that dream home.Reach out to a loan officer to discuss your options.