If you plan to buy or sell a home, you will probably spend plenty of time looking at the current market near you to determine if this is the right time to make a move. Homebuyers may spend more time looking at mortgage rates, trying to see if they can find the best rate. Sellers, on the other hand, may spend more time watching the comparables, hoping to get top dollar for their home.
No matter which side of the transaction you find yourself on, knowing if you are in a buyer’s or seller’s market is key for understanding what you might be facing when it comes time to either write or accept an offer.
For the last several years, many markets have favored the seller. Low inventory of existing homes for sale has meant buyers have had to compete for every home on the market. The number of homes available for sale peaked during the Great Financial Crisis and never fully recovered. The pandemic buying spree put even more pressure on inventory, hitting rates not seen in decades.
There are some signs this may be shifting. Inventory is rising in some areas and prices are stabilizing. However, the September Fannie Mae Home Purchase Sentiment Index found that 81% of those surveyed thought it was not a good time to buy and 65% said it was a good time to sell. While 42% believe mortgage rates will continue to fall, 39% said home prices will increase.
Getting In To See A House Is Challenging
The market inventory rate can tell us how fast homes are moving. In a seller’s market, some homes may not even be listed for sale before they are sold in an off-market transaction, so inventory might be even lower than what real estate agents report.
Sometimes, a potential buyer may be competing against investors who often swoop in with a quick cash offer. In a seller’s market, making an appointment to see a house may be hard because there is so much interest. This is one reason you may want to ensure you work with an agent. Agents may tour a house ahead of time and can tell you if it is worth checking out. The listing agent may be flooded with inquiries if it's a hot market.
There’s A Deadline For Offers
If you’ve looked at real estate listings in the past several years, you might have noticed that some of them have set a date on when all offers have to be in. Usually, this is a day or two after the first open house. This means the seller expects the home to sell within 30 days.
A deadline clearly signals that the seller is in control and expects a flurry of competitive offers to consider. While this is great for the seller, who doesn’t have to worry about offers trickling in, it’s not as positive for buyers, who know they will be competing against each other and may not even get a chance to see the house privately before deciding to purchase.
The prospect of a deadline is one reason it is important to find a mortgage lender first. Walking into an open house, falling in love with a home, and being unprepared to make an offer can be a very painful experience. If you already know what you can afford and are preapproved for that, it can show the seller that this is a serious offer.
You Are Asked To Sweeten The Deal
In a seller’s market, simply offering the asking price may not be enough to get you the home of your dreams. If a seller is looking at competitive offers, you may have to raise what you are willing to spend. Even as prices rose during the pandemic, homes consistently sold above their listed price. Now, things are shifting. Realtor.com reported that homes sold for around 1.9% under the listing price. That’s a national number and doesn’t tell the full story.
While making a cash offer can be attractive to a seller who wants a fast and hassle-free closing, that is not the only way to capture attention in a seller’s market. Some sellers are very interested in knowing who will buy their home; others don’t care. Many real estate agents talk to the agent on the other side of the transaction to get a sense of what the seller wants to see.
One popular concession that can happen in a seller’s market is waiving a home inspection. A home inspection allows a buyer to have someone evaluate the house and determine whether or not any costly repairs are needed. This can be a powerful bargaining tool if there is something wrong with the house.
You Can Still Get A Good Deal In A Seller’s Market
Being in a market where everyone wants your house can be highly advantageous if you are a seller. You can expect to receive a fair price for your home and be able to choose the offer that works best for you.
However, all hope is not lost for a buyer competing in a competitive market. For a buyer, starting with your financing and down payment already prepared puts you in the best possible position. Having an agent submit your offer can also help. It can also help avoid getting too attached to the first house you see. Sometimes the biggest mistake a buyer can make is falling in love with a house and being willing to do whatever it takes to close the deal. Although buying a home is emotional, it is also an investment, and you must balance finding the right home with getting a price you can live with long term.