Battling for the few available properties in a seller’s market
A seller’s market occurs when housing demand exceeds supply. I am only speaking from my Memphis niche, but we are in the strongest seller’s market I have seen in 20 years. In a seller’s market sellers truly control the market: timing of adding their properties to the inventory, ratcheting up pricing based on high demand, and showing less flexibility in negotiations. If you are considering a particular property, especially if it is nice and new on the market, be prepared for your offer to have 1 to 5 competing offers. Be prepared to make your best possible offer on the first try. Do not expect to get a “deal” in this market. While it is common to ask the seller to help with buyer closing costs, pay for a hefty home warranty, and do a long list of repairs, offers loaded with extra seller expenses are likely to be bypassed for “cleaner” offers. I talk with home buyers who have been unsuccessful in 2, 3, or even more competitive offer situations.
So how do you win in a competitive market?
- Get your money in order – If you are seriously considering purchasing a home, you should have already spoken with a loan officer, not only about getting pre-approved for a loan, but also to determine the maximum sales price you would be comfortable with.
- Work with an experienced agent – It’s a tough market, and working with an experienced agent will give you a definite edge in negotiations.
- Stay on top of the inventory – Work with your agent to get real time MLS (multiple listing service) data. Remember that the popular portals like Zillow, Realtor.com, etc. and even local company and agent sites lag behind real time listings. A recent online search produced 22 results in the local market. Checking the MLS indicated that 16 of those were already under contract. You want to get the information as soon as that listing agent pushes the enter button in the MLS. If you are quick enough you may be able to beat competing buyers to the punch.
- Don’t expect a “deal”– Deals are made in buyer’s markets, when inventory is high. Making a low offer to get a better deal could cost you your dream home.
- Write a clean offer– As I mentioned above, make it as simple for the seller to understand as possible. If you don’t really need closing costs, don’t ask. Remember the seller is looking at her bottom line.
- Be prepared to lose and try again– Residential real estate is loaded with emotion. The transaction, though, is really a business negotiation. Either it works out in your favor, or you move on.
It’s a jungle out there right now. Tough situations demand tough strategies, decisiveness, and preparation. If I can be of service, give me a call. Good luck!