There’s no doubt about it – we’re in the midst of a seller’s market. Inventory is low, prices are high and competition is fierce. That doesn’t mean, however, that you can’t find the house of your dreams right now. If you’re wondering how to buy a house in a seller’s market, here are some tips on what to do (and what not to do).
Be prepared. In the current high-demand, low-inventory market, it’s not unusual for homes to go from newly listed to under contract within just a few days. So it’s crucial to have all of your affairs in order before you start your search. First, zero in on the specific areas and neighborhoods that interest you. Make a list of must-haves and deal breakers; perhaps you’re willing to forgo having a large backyard, but a finished basement is non-negotiable. Next, find a real estate agent who has experience helping buyers find homes in the particular neighborhoods you’re targeting. Make sure you’re ready to move fast with an offer by securing a lender and getting pre-approved for a mortgage. And set aside some money for an earnest money deposit (more on that below).
Anticipate competition. According to a Redfin survey of 400 U.S. metropolitan areas during the first few weeks of 2022, more than 41% of homes sold above their asking price – an increase of 8% over the same time period last year and more than 20% since 2020. Since supply is currently so much higher than demand, sellers will sometimes set their asking price a little lower than what they hope to receive, in order to encourage potential buyers to try to outbid each other. You should expect the asking price on a house to be just a starting point, and decide in advance how willing you are to go above that price (and by how much).
Make a compelling offer. Sellers often have several offers to choose from, so it’s imperative to make your bid as strong as possible. The best way to do so is to present a “clean” offer – that is, one that is free of any contingencies like appraisal, inspection, sale of your own home (if applicable) and so on. An earnest money deposit (EMD) is another great way to show sellers that you’re serious about buying their house. An EMD is a good-faith deposit of a certain amount of upfront money on your purchase, which the seller would keep should you decide to back out of the contract.
Some agents recommend that you write a personal letter to the sellers, explaining why you love the house and how much it would mean to you to have your offer accepted. Others consider these letters a waste of time; ultimately, sellers are more likely to choose a buyer who presents them with the best financial package, regardless of their intentions.
Don’t get discouraged. Buying a house in a seller’s market requires patience. You should be prepared to lose out on a few houses before getting your offer accepted, so it’s wise not to get too attached to any one house before you bid on it. With a little planning and perseverance, you will eventually be rewarded with a house that you love.