realtor Archives - The Coleture

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.

Purchasing Property in a Seller's Market:
Two children sitting on steps to a home in the French Quarter, New Orleans. — Photograph taken by The Coleture Visual Art Studio: French Quarter, New Orleans, LA

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.

Purchasing property in a seller's market: a photograph of a large home taken by The Coleture Visual Art Studio.

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You’ve been on the ground, searching for the property of your dreams for months and months. A million different times, you’ve changed your mind about what you want. You’ve driven yourself (and your real estate agent) crazy. All of a sudden, there is silence amongst the noise. You’ve found your perfect space. This is it! You have your agent write an offer. It’s accepted. She says to you, Congratulations! You’re officially under contract. Meanwhile, you’re thinking: Now What?

"So Your Offer Has Been Accepted. Now What?" -a look of confusion while wondering what's next

Purchasing your first piece of real estate is an endorphin you may chase for some time. It’s like a toddler taking his first steps. The pride of it all! At first, your excitement is almost uncontainable. But like a storm in the night, comes the flurry of emotions. Fear, confusion, the what ifs, and what do I do next thoughts can become invasive. Take a deep breath. The homebuying process is a process. I think people tend to forget that.

Background Noise

In the background, your agent will be working. There are lots of moving parts to real estate transactions. She will be scheduling your inspection(s), coordinating the communication between all parties, including the lender and title company. You will have documents to sign and things to pay for.

And if you are financing this deal, that means there are several people party to the ability to close on time. The loan officer and the underwriter, the appraiser, the title company, the inspector, the responses from inspection– the list could go on. So let’s start from the top. Now that your offer has been accepted, here’s what comes next.

Contact your lender.

One of the first things you will do is send your lender a copy of the accepted offer, also known as the Executed Purchase Agreement. Now the lender knows you are officially ready to move forward with the loan process. Make sure that you have all documentation required of you. You want to be in the position where the lender is not waiting for you to do anything on your end.

Cut the check!

Remit your deposit payment to whomever will be holding the deposit. Oftentimes, it is the title company, but can also be one of the real estate brokerages involved in the transaction. Personally, I recommend that buyers have the title company, which serves as a third party, to hold the monies.

Get insurance quotes.

Start calling insurance companies to get quotes. If you’re in Louisiana, those calls should be made to both homeowner and flood insurance companies. Homeowner’s insurance pricing is going to rely on a number of factors, such as your property’s location. And don’t forget, pets cost money. Some policies do not allow certain animals, including specific breeds of dogs. And just in case you were wondering, there are a couple of things you can do to potentially lower the cost of your homeowner’s insurance, including installing a security alarm system and/or a fence.

Inspection/Due Diligence Period

While your agent will have scheduled the inspection, you will likely have to pay for it just after it has been scheduled or when the inspector arrives on site. Your agent is normally present for the inspection. Sometimes both the listing and selling (buyer’s) agents are there. Because the inspection can take a minimum of two hours, I tend to recommend the buyer not come, until towards the end, if the buyer chooses to come at all.

At the end of the inspection, the inspector will go over everything with your agent and discuss the most meaningful of his findings. From there, he will send you and your agent the report. In Louisiana, you are allowed 72 hours from receipt of the report to respond to the seller of the property with your decision. If you are satisfied with things as they are, then you simply sign off that you are ready to proceed with the Act of Sale, or closing. On the other hand, should you find that you are not content with the results of the inspection, your response can be handled in a number of ways.

One option is to ask the seller to address whatever issues you have with the property. You could also ask for a reduction in the sales price. Or, you can ask for cash at closing. If the amount of work is too much of a concern for you, you are able to cancel the deal, and get your deposit back without penalty.

Home Stretch

Assuming you are moving forward, you are now waiting on a few things. One, the results of the appraisal report– which has the power to kill a real estate deal. If the property appraises for more than what you are under contract for, then the transaction can proceed without cause. Contrarily, if the property appraises for less than what you are under contract for, your lender will rescind the pre-approved loan amount. At that point, you will have to either come up with more money to make the difference, renegotiate the price down with the seller, or the deal will be cancelled due to your inability to obtain financing.

Two, the title clearance. The goal is for the title to be free and clear. The title company will hopefully address any potential issues early on, such as a lien against the property or some far away heir that needs to sign off on the sale.

And finally, you are waiting on your lender to utter those magical words: you have been cleared to close. In other words, your loan has been underwritten and come back approved for funding. This information is then provided to the title company, and the title company schedules the closing date.

The Act of Sale.

Closing day has finally arrived. One thing I will say is, a real estate deal is not a deal until (and unless) it closes. Be prepared by readying all monies due. You should have wired your payment, or have your check in-hand to submit to the title office. At the closing table, you will present your ID, your money, and sign a bunch of papers. Sometimes, you may learn that some money is given back to you at closing, so the title company could possibly cut you a check! Sometimes. Don’t get too excited. Anyway, if you have successfully made it to this point, then Congratulations! You are officially a homeowner.

A Note: Do not make any large or excessive purchases, while you are in the process of buying property. Do not, do not, do not. If you need to make any large purchases, or take on any large debts, do it at the time the deal has closed. Not a moment sooner.

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Purchasing Property in a Seller’s Market