The home hunt is always a stressful situation. You don’t want to settle or face regrets after you sign. But what happens when supply is limited, and prices are rising?
Welcome to a Seller’s Market–tough times for home buyers. But buying a home in these high-pressure environments doesn’t have to leave you pulling your hair out.
Take some deep breaths. Think happy thoughts. Here’s what you need to know about buying a house in a Seller’s Market.
1. Lay Out the Pros and Cons of Buying Now
The stars won’t always align perfectly when it’s time to buy. But that doesn’t mean that now is a bad time to buy. There are pros and cons.
When you buy now, you stop paying rent. Start building equity.
Even though home values take a little dip after a big Seller’s Market, they do tend to go up over time.
Plus, what’s it worth to you to ditch apartment or starter home living and have a space of your own?
It’s important to consider all the angles. Yes. You’ll be paying more right now. But rest assured, it could still work out in your favor.
2. Mentally Prepare to Pay More
During a Seller’s Market, more people are bidding on the same home.
It doesn’t matter what kind of negotiator you are. Your purchase is governed by straight supply and demand economics.
Preparing yourself emotionally ahead of time can help you stay level-headed and objective so you make the best decision for your family. The last thing you want to do is miss getting the perfect home over a few thousand, only to settle for an inferior home later because you’re afraid of missing out again.
3. Put Your House on the Market
According to the National Association of Realtors (NAR), 51% of home buyers right now have an existing home they could sell.
Chances are your own home will also sell fast for more than the asking price right now. Even if you’re upgrading, that will cancel out the premium you pay when buying during this time.
4. Leverage Your Home’s Equity to Become a Cash Buyer
So you have significant equity in your existing home. But you want to keep it as a rental rather than selling it right now.
You’re likely to get a nice, high appraisal in the current market. So you could gain access to your home’s equity by doing a MT Pleasant refinance on your existing home. Then use this cash to gain the privilege of being a cash buyer.
Cash buyers like you will have access to auction inventory. And during a bidding war, most sellers will prefer cash in hand to risking that buyer financing falls through. They may therefore take a lower offer.
5. Get Financing on the Backend
This little-known real estate trick can work effectively during a Seller’s Market. First, see #4. Then refinance the home you just purchased.
Now, you have that equity back. You can use it to pay that first refinance loan. That would essentially put the equity back in your first home. Or if you’re getting into real estate investing, you can take that money and put it on a third home–either now or once the Seller’s Market cools off.
6. Geography May Mean Less Sticker Shock
2021 has certainly been an unconventional Seller’s Market. Many smaller communities are seeing their home values go up more than they usually would. That’s all thanks in part to the post-pandemic lifestyle. An increased number of people can now work from home, according to The Wall Street Journal.
They no longer have to live in an expensive city.
Despite this, if you do currently live in an expensive area, you may find what you’re looking for in a different geographic location.
Don’t sell yourself short. Small town America has a lot to offer those who aren’t hard-set on living in a bustling city.
7. Look for Homes Under Budget
Expect a bidding war. It takes time to put down an offer, so give yourself some wiggle room to raise your offer if needed.
8. Don’t Fall in Love
Breaking up is hard to do. But it can be just as miserable to fall in love with a home only to watch it slip out of reach. Stay pragmatic in a Seller’s Market. Don’t fall in love too soon.
9. Find Out What’s Important to the Seller
They’re not always looking to sell to the highest bidder. They may be selling a poorly performing rental or be more about seeing this home go to a family. It never hurts to do a little research. Work the angles you have at your disposal.
Buying a Home in a Seller’s Market
Buying in a Seller’s Market is certainly a different animal. But if you acknowledge the rules of the game and keep a level head, you can still buy the home of your dreams for a reasonable price.