When the real estate market is hot, sellers have the upper hand. They can set prices, accept or decline offers, and rest easy knowing they have leverage.
Since we’re still in a seller’s market right now, buyers have to be strategic about how they approach the home purchase process.
The Buyer’s vs. Seller’s Market
The average homebuyer doesn’t spend much time thinking about the complexities of purchasing a house in different markets, but the distinctions between two separate types of market can be surprising.
You’re probably familiar with the two basic terms:
- Buyer’s market. This happens when there’s far more supply than demand. In other words, you can find more listings on the market than people who are interesting in buying a house. The upshot is that buyers have more options and therefore leverage: sellers have to court them.
- Seller’s market. In a seller’s market, there’s more demand than supply. In other words, more people are looking for a house than there are houses on the market. Thus, sellers have more leverage and buyers have to work harder to land a good deal.
Currently, we’re in a fairly substantial seller’s market. Interest rates — though they have begun to rise — have been at historic lows.
Unemployment has also reached unusual lows while incomes are rising. This has given more people the ability and motivation to purchase.
How to Buy in a Seller’s Market
Though it’s far better to be a buyer in a buyer’s market, you shouldn’t automatically assume you won’t find a good deal in a seller’s market … because you can!
You’ll just have to be creative and patient. Here are three tips:
- Work With an Experienced Agent
It’s wise, even essential, for you to work with an experienced local agent. His or her expertise will help you figure out how to pin down a deal in a seller’s market, and local experience will provide insights into how the specific market functions.
Take the Southwest Florida market for an example. Because of the pleasant climate, this region tends to experience an uptick in activity during the winter months (when other areas of the country have turned cold and unpleasant).
A local agent knows how this works and can guide you along. “Based on the basic economic laws of supply and demand, sellers have the upper hand during this time,” Beattie Development points out.
“They will likely sell their place quickly, perhaps for even above asking price, with minimum pushback from buyers. Sellers may even get away with putting all of the closing costs onto the buyer.”
If you’re working with an inexperienced or national agent, you might not be aware of such nuances. Securing a knowledgeable agent can pay off.
- Get Pre-Approved
You want to make yourself as attractive as you can to potential sellers. This does not necessarily mean you have to wear the latest fashion and put on a nice, big smile.
It means showing sellers how you serious you are. Getting pre-approved for the right amount is a huge step in the right direction.
- Make a Tantalizing Offer
It’s an inescapable fact of life that money talks. You want to be able to make an offer that the seller can’t refuse.
To put some icing on the proverbial cake, offer the seller a say on such details as the closing date, attorneys, and inspectors. Try not to get too picky about repairs and inspections.
The more flexible and cooperative you can be, the more likely the seller will want to work with you.
- Timing the Market
Nobody knows what 2019 will hold. Early indicators suggest that interest rates will continue to rise and we can expect some instability in the financial markets.
This could be good for buyers; it’s likely to shift some of the leverage back in their favor. But it would unwise to assume anything.
In all honesty, perfect timing in the market is nearly impossible. You might hit it right, but you could as easily jump too early or wait too long.
Instead of trying to game the market, strive to be patient and disciplined in general. Make a list of what you need, set proper limits with regard to what you can afford, and study the values in your area.
If you can team up with the right agent, you could make a smart purchase under any market conditions.