Real Estate will always be around. I don’t care how many times the market “crashes,” people still have to have somewhere to live, and once a lot is purchased, it’s purchased.
Every business industry is about supply and demand. There must be a demand for your supply, otherwise, you have no business. The Real Estate Industry is no different. Real Estate happens to be one thing that can run out because there is only so much land. That makes the supply of land inherently limited. By definition, it would seem that a buyer is always in a seller’s market, but that is not the case. You must first understand a few basic things before you can truly grasp what it means to be purchasing property in a seller’s market.
Successfully purchasing property in a seller’s market requires that you understand what a seller’s market is.
Generally speaking, there are three types of real estate markets– a Buyer’s Market, a Seller’s Market, and a Balanced Market. A balanced market indicates that buyers and sellers are on equal playing field, while a buyer’s market tends to mean that there are more homes available for sale than there are buyers. If a seller wants to move a property, he has to make his listing (and pricing) the most attractive. Conversely, a market becomes known as a seller’s market when the supply of available homes is less than the number of active buyers.
You may be seeing that a seller’s market is the scenario for most of the country right now, but you must remember that Real Estate is very local. There can be national trends, but the New Orleans market is very different from the Atlanta market, and the Atlanta market is very different, than say, the Phoenix market. To compete in a seller’s market as a purchaser, you must first be ready, willing, and able to buy.
How did we get here?
For those who are curious as to how we arrived in our current seller’s market, there are several factors in play. Most reasons can be attributed to effects of the Coronavirus. There has been a decrease in production across all industries, including home building. The attractiveness of super low federal interest rates, and people deciding during the pandemic that they wish to live more comfortable lives have all played major roles. The latter can translate into buying a larger home or a second home to staycation for those with more resources.
Consult your trusted agent
A seller’s market can drive some buyers crazy. The first thing is, trust your agent throughout this process. If you cannot trust or don’t listen to your agent, find another one. I do not think I can stress enough how important this is. Your trusted agent should fight for your best interest. If your agent gives you some recommendations that you are not sure of, ask questions, but be okay with accepting that he or she is the expert in their field. However, if you really do not like what they are saying, I implore you to consider finding and securing another agent to assist with that transaction. Working with a trusted agent is crucial to your success. If you do choose to move on, be sure that you are not contractually obligated to remain with that particular agent.
Offer a heavier deposit
A seller wants to know that you are a serious buyer. If you have the ability to do so, place a larger deposit amount down with your offer. If you could submit your offer with a $5,000 deposit, it is a stronger offer than a $1000 deposit. The seller sees this as a person who really wants to purchase his property.
Skip the Closing Costs
Keep the contingencies to a minimum. Don’t ask for closing costs if you don’t need to. Think about it from this perspective: if a seller has multiple offers all at the same price and with similar terms, and you are the one person making an offer not asking for closing costs, that seller is likely going to choose your offer. There could be someone offering more money than you are, but by them asking for closing costs, the seller may net more profit by accepting your offer. If you can make the purchase without the assistance in closing costs, forgo them.
Purchasing a property with cash
Hands down, the absolute easiest way to buy property is when you’re purchasing a property with cash. You can close as soon as you can close. Two things I recommend are completing the title search and an inspection, just so you can see what all the property needs.
Back in the day, Cash was King. (Now, Credit is).
If you were a cash buyer, it was possible for you to make a lower offer and have it accepted because you were paying cash. In today’s world, that no longer works. The seller receives cash at the end of the sale regardless, so why would she cheat herself out of more money because you have liquid cash? The most appealing feature in an offer is the time in which you are able to close. A typical bank loan purchase will take between 30-45 days. If you are a cash buyer and you’re able to close in 15 days or less, that is an attractive offer.
There is no one size fits all approach in Real Estate.
There are other things that we do take into consideration as agents. Still, you want to make sure that you are ready to do what it takes to purchase your home. Buyer readiness is the most essential thing because you could be searching for years and never pull the trigger. When contacting an agent, be ready. And when you secure an agent you trust, be confident that you can and will purchase the property you desire in seller’s market.