It can be difficult and somewhat frustrating to buy a home when there are more buyers than sellers. In a so-called “seller’s market,” buying a house is extremely competitive—in fact sometimes a home will sell within a few days—but buyers who act fast and stay well informed will get that perfect dream house despite the fierce competition. If you’re a homebuyer in a seller’s market, here are some tips to help you thrive.
Get Pre-approved by a Lender
Getting pre-approved is the best way to demonstrate that you’re a serious buyer who has the creditworthiness to purchase a home, and this is especially important in a seller’s market. Why? Because sellers will often get multiple offers in a single day, so they want to be sure that they’re not wasting their time with a buyer who can’t get a loan. Sellers are looking for a “sure deal,” and getting pre-approved means that a buyer is financially backed by a lender to close on a house.
To get pre-approved for a loan, most lenders will require you to supply the following information:
- Pay stubs
- Bank statements
- Tax returns/W-2 forms
- Other documents that show income (e.g. second job, overtime, bonuses, etc.)
The pre-approval process includes an extensive look at your credit report, employment history, and current income. For some lenders, the pre-approval process only requires a ratified contract and an appraisal, which puts you in a position to close on your loan faster. This program is referred to as a TBD Purchase Program and it gives you an important advantage in a seller’s market over financed loans that have not moved forward yet—plus, it can put you on an even footing with some of the increasing cash offers.
Once you’ve become pre-approved by a lender, you will know which loans you can get, how much you can borrow, and the interest rate you will be charged.
Use Your Realtor as a Resource
Having an experienced realtor at your side is key to your success in a seller’s market. Your realtor is a homebuyer specialist—a valuable resource with special insights into purchasing a house in your particular area. In a seller’s market where houses are in high demand, don’t be afraid to use that information to your advantage. While anyone can go online to shop for a home, only a realtor can have industry connections and exclusive information about “pocket listings,” or homes that are not advertised in a multiple listing service (MLS).
Most importantly, enlist your realtor to help you identify the needs of the seller. For example, perhaps the seller only cares about getting the right price, or maybe he wants to sell the house quickly—these are important things to know so you can make an offer that satisfies the needs of the seller. This information will not always be apparent, but a skilled realtor can anticipate these needs so your offer stands out amongst the competition.
Research the Area Before You Make an Offer
In a competitive seller’s market, you have to be ready to make an offer at any moment, but that doesn’t mean you have to rush into things. As a buyer, you need to gather as much information as possible about the area before you submit an offer. Do your homework so you can make an informed decision you won’t soon regret. For instance, ask yourself questions like, “How good are the schools in this area?” and “How far is the commute to work?”
You can start your research online by using Zillow or Trulia to get basic information about listings in your area. Realtor.com and Redfin can also offer valuable information. Additionally, you can talk with residents in the area to learn first-hand what the neighborhood is like from a living perspective.
Be Flexible & Make Compromises in Your Offer
Homes will often get offers the same day they’re listed so be prepared to make some compromises with the seller. For instance, if the seller wants to stay a little longer in the house, try your best to accommodate his wishes. In general, buyers who are flexible and open-minded to the seller’s demands are the most successful in a seller’s market.
Additionally, you don’t want to make a laundry list of contingencies in your offer that could potentially be a deal breaker. For example, don’t assume the seller will leave the oversized projection TV, so leave contingencies like this and other petty requests out of your offer.
It’s important to remember that not all sellers in a competitive market are looking for the most expensive offer—sometimes convenience speaks louder than money.
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