Should You Buy a Home During a Seller's Market?
A seller’s market creates competition in a time where housing supply is low and buyer demand is high. Here's how to know if you should still buy a home.
A tricky market can cause plenty of pressure and concerns to prospective home buyers and sellers alike. You hear plenty about increasing mortgage rates, low housing supply and high demand, and more forecasting that we’re seeing more of a seller’s market.
But what exactly does this mean, and how does a seller’s market impact your decision to buy? Read on to find out more about this market condition and how to best tackle it.
What is a Seller’s Market?
A seller’s market occurs when there are more buyers than there are homes for sale. This means that homeowners have the competitive advantage since available housing supply is low, and demand for homes from buyers is high.
The conditions vary by market, but watching national trends can help you determine if the economy and other macroeconomic factors are leading to a seller-dominant market.
How Does a Seller’s Market Impact Buyers?
Being a buyer in a seller’s market means competition against other buyers will be fierce. You’ll need to be ultra-prepared and manage your expectations beforehand, as the buying process can take longer and cause disappointment or frustration.
While a seller’s market may seem discouraging, it’s not outright impossible to buy a home during a seller’s market. Still, there are important factors to consider to determine whether or not you should buy a home during a seller’s market.
Things to Consider Beforehand
If you’re thinking about buying a home in a seller’s market, you’ll want to consider a few critical things before you start house hunting:
- Your budget: While you may have a nice nest egg squirreled away, the reality of a seller’s market is you may end up paying more than anticipated. Bidding against other prospective buyers is inevitable. You may gain the upper hand by making an attractive offer, but that could eat away at your budget.
- Renting vs. buying: While owning property is touted as a critical investment, it’s also one you want to carefully examine and prepare for. Leveraging a rent vs. buy calculator can factor in your annual gross income, key expenses, and the value of a home against current mortgage rates. These calculators can help you get a clearer view of the return on investment you get from renting or buying, which can help shape the timing of your purchase.
- Timing: Is there a life event or urgent need pushing you to purchase? Defining and being clear on your “why” can help you determine whether or not you truly need to buy, or if it can wait while you save more cash.
How to Prepare to Buy During a Seller’s Market
If you’ve decided to take the plunge and make your move to buy a home in a seller’s market, here are some critical things to do to prepare and set yourself up for the best odds of success.
#1. Hire a Professional Real Estate Agent
Hiring a pro agent is the most pivotal step to take in a seller’s market. A real estate agent is hungry to find the home that’s in your best interest. They’re adept at getting clear on your needs, wants, and how your budget and timeframe line up. Agents are also equipped with deep knowledge and up-to-date intel on the market you’re searching in, helping you get a leg up against other buyers.
#2. Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage before you dive deep into the home search process is key. Knowing what a lender will loan you for a mortgage will help you understand your buying power. Having this knowledge before you start searching and making offers is key to knowing what your home price range is. It’ll also allow you to swoop in and make offers if other buyers aren’t as prepared.
#3. Keep Your Options Wide Open
As you start looking at homes, you need to keep a clear and level mind. Identify your non-negotiables, and still keep your options open. Be relentless with your list of musts versus nice-to-haves. You may have to look at and bid on multiple properties.
#4. Get Ready to Get Competitive
A seller’s market means it’s a buyer’s battle. Because the supply of housing is low, you can anticipate bidding wars. These take place when buyers make competing offers, which drives up the price of the home. As a result, the final price generally ends up being well above what the seller was originally asking for. This can be emotionally taxing, which is why it’s critical to have an agent on-hand and your finances in order.
#5. Be Patient
Naturally, buying in a seller’s market will take longer than simply selecting a home and putting in a down payment. Keeping your house choices flexible and being prepared beforehand to anticipate a longer buying time frame can help keep anxieties in check.
Get in Touch With a Trusted Professional Agent Today
In a seller’s market, you don’t want to go it alone. Take the guesswork out of the buying process in these conditions and get hands-on, dedicated support from a professional real estate agent in your area. Find your trusted pro agent today on RealEstateAgents.com!
