Business, by its very nature, is cyclical. Markets and businesses are cyclical due to external influences that inevitably impact the actions and sentiment that drives the market. These external factors include –
- Interest rates.
- Economic policies.
- Consumer confidence, among many others.
One of the most critical influencers within the real estate market is which side of the demand/supply curve is dominating the market. As a player in the real estate market, it is imperative to understand the nature of the market you are operating to optimize your chances of getting the home you want most.
As 2020 heads into the home stretch, with great fascination, the real estate market continues to buck conventional trends by heating up – and entering a seller’s market – despite the external forces of a worldwide pandemic.
Seller’s Market At-a-Glance
A seller’s market is characterized as follows –
- A time when the market has more buyers than there are homes for sale. An economist would explain this phenomenon when the demand side of the curve dominates the supply side of the curve.
- Prices tend to rise due to the domination of the demand side of the curve.
- Listed homes tend to sell quickly.
- Multiple offers are often part of the buying process.
Home Buying Tips in a Seller’s Market
Some proven successful strategies can help a buyer improve the likelihood of a successful purchase when facing a challenging seller’s market. Consider this sage advice –
- Begin the home buying process as soon as you can to give yourself as much time as possible. If you find a property that meets your specifications, move quickly, without appearing aggressive.
- Obtain a pre-approval letter from a qualified lender before making an offer. Time is typically a buyer’s largest hurdle in a seller’s market, so being appropriately prepared when making an offer to purchase is vital to your potential success.
- Simplify your offer, but make it as strong an offer as possible. This often includes a significant down payment, shortening the anticipated closing date, or waiving certain contingencies, if a buyer understands the consequences of waiving contingencies.
- Be responsive, compliant, flexible, and agreeable to the process.
- Appeal to the seller by providing a personal note explaining why you want to buy the seller’s property.
A Word About Bidding Wars
A bidding war occurs when one or more interested parties make an offer on the same property. Some strategies that allow you to tip the scales in your favor in a bidding war include –
- Cash is king in bidding wars because a seller does not have to wait for the buyer to complete the mortgage process.
- Include an escalation clause that officially states how your bid may incrementally increase in response to other buyers who outbid your initial offer.
If you have any mortgage or refinance questions, please reach out – we’re here for you!