Buying a home in a seller’s market is no easy feat. You will likely have many bidders to compete with as you try to buy the house you desire. Just how far do you take it? At what point do you give up and try to find a different house?
Before you give up, here are 10 tips you can use when you are buying in a seller’s market.
Get preapproved for a mortgage
Technically, you should get preapproved for a mortgage whether it’s a seller’s market or not. You want to let the seller know that you are a serious buyer and that you can get the financing to buy the home. A preapproval lets sellers know that a bank will give you a loan as long as you satisfy the conditions they state in the letter. Many sellers won’t even deal with a buyer that doesn’t have a preapproval.
Get a real estate agent
We know, the last thing you want to do is spend more on a home because the seller has to cover the real estate professional’s commission, but in a seller’s market, it’s a must. A real estate professional knows how to navigate the market, what to bid, and when to bid. The real estate agent will act with the swiftness that is necessary to get the home you want. There isn’t time to sit on the offer or figure out what to do. If you are serious about a house, you need someone that knows the business.
Be proactive in your search
You can’t be casual in your search for a home. You have to commit to the search and be ready to pounce on a new house that hits the market. If you are using a realtor, you should have fairly early notice when a house hits the market that might meet your needs. Don’t put off going to see it; instead, see it as quickly as you can so that you can decide if you want to be a part of the bidding war.
Don’t bid too low
It’s easy to want to bid as low as you can, but you don’t want to insult the seller. If you know there are other bids on the table, be prepared to bid the market price for the home. This might or might not meet the full sales price; it depends on how the seller priced the house. Again, if you have a real estate agent helping you, he/she should be able to give you a ballpark figure of the market value so you know where to keep your bid.
Have earnest money ready
Not all sellers require an earnest money deposit, but when a seller is giving up other bids for yours, you may need to do so. Earnest money lets the lender know you are serious about your bid and will follow through on the contract. You can count on the earnest money to be between 1% and 3% of the purchase price.
Get personal with the seller
This might sound weird, but if you get to know the seller, you may have a better chance of winning the bidding war. Remember, the seller is selling something that is a part of them. They don’t want to sell it to just anyone. Instead, they want someone that they connect with to buy the home. It could be a story you tell or just the connection the seller feels with you that wins you the bid.
Don’t ask for too much
This part can be hard. When you buy a house, you want it to be perfect, so you want the seller to fix anything that’s wrong. But if you ask for too much from the seller, they may turn to another bid even if the dollar amount is less than your bid.
Respond to your agent or the seller quickly
When you are trying to find a home in a seller’s market, you have to have open communication with everyone involved. If you are representation yourself, you’ll be dealing with the seller on your own. If you use an agent, you’ll communicate mostly with the agent, but you have to respond quickly. You never know when it’s something to do with the bid and what the seller wants.
Keep your eye on the prize
Don’t make the mistake of getting caught up in a bidding war. Before you go into the bid, know the maximum amount you are willing to spend. If the bidding gets out of control, know when it’s time to walk away. Not having a plan could leave you with a home that you can’t comfortably afford.
Don’t stop trying
The biggest rule to follow is don’t give up. It’s easy to get discouraged, especially as a first-time homebuyer that’s never been in the market before. Hold on to the belief that the home that was meant to be will be available. If you lose a bid, the home wasn’t meant to be.