What is a Seller’s Market?
In real estate, we define a market by how many months of inventory is available to a buyer, i.e. if no new homes came on the market, how long would it take to sell what’s available now? 6 months of inventory is considered a balanced market. More than 6 months = buyer’s market; less than 6 months = seller’s market.
Each kind of market favors either buyers or sellers. In a seller’s market, the advantage goes to the seller.
What does that mean for a buyer?
Be prepared! As a buyer in a seller’s market, you must do your homework, understand “the rules”, and be ready to make a decision and move forward!
1. Be prepared—before you start looking at houses, you need to know your numbers! How much house can you afford? How much are you actually willing to spend—they’re not necessarily the same! How much cash do you have? Will you be receiving gift monies? The answers to these questions are best discussed in advance with a lender who can guide you to the best type of loan and pre-approve you for a purchase price that meets your needs and that you can qualify for. ***Very important to do this in advance!***
2. Enlist the help of a professional, full-time REALTOR® who knows the market and can help you find the right home. As a professional, he or she is much better qualified to give you advice, guide you through the steps, and help you through the process. And a professional REALTOR® knows more than your friends, family, and what you’ve seen on HGTV, so listen to his or her advice.
3. Do your homework—now that you’ve determined what you can afford, decide where you want to live and make a list of your needs and wants in a home. Where can you be flexible and what are the absolutes? When do you need to move? How much will you be putting down for Earnest Money?
4. “The rules”—unofficial. Think of them as guidelines when you find the house you want.
a. If you like a house, I can almost guarantee that other buyers do too!
b. If you like it, and if you want it, make an offer—NOW! This is why you do all that homework in advance!
c. Make your best offer! In a seller’s market, low-ball offers are not taken seriously, especially when there are multiple offers to consider, and that is becoming more and more frequent, especially when inventory is tight as it is now in many areas!
d. Remember that an offer is about more than just price. There are other factors for a seller to consider, and often a lower price prevails if other terms are more favorable. For example, can you accommodate a seller’s timetable for closing? Are you asking the seller to contribute to closing costs, and if so, how much? Are you requesting extensive repairs or allowances? The more flexibility you have, the more favorable your offer will be, even if you don’t offer full price, but keep in mind what I said earlier about low-ball offers!
Bottom line for buyers—get your ducks in a row, be prepared, be flexible, and be ready to make your best offer when you find the right house! Thinking about it could mean someone else will get it—you snooze, you may lose!