Most analysts would agree that we're in a seller's market. The past several months have been an interesting time, and while the coronavirus has negatively impacted much of the economy, real estate has been surging.
Much of this is likely due to the low interest rates, hovering below 3%. There are other factors too, including pent up demand following strict lockdowns during the spring, and for some people, there's an interest in moving to the suburbs and away from bigger cities.
If you want to buy, there are a lot of factors in your favor right now, but challenges remain.
Driven by surging demand and low inventory, the median home price nationwide rose to $295,300 this past summer. Despite these rising home prices, sellers are finding that they're getting multiple offers and offers well above asking.
So what can buyers do during this time?
If you're going to jump into a seller's market headfirst, you're going to have to be decisive. Time is critical in these situations, and sometimes getting the home of your dreams is as simple as being first.
If you want to see a home that goes on the market, don't wait until the weekend for a showing. Try to get a showing as soon as you can, or if that's not possible, do a virtual showing.
Along with being decisive and ready for what's coming, choose a great real estate agent. You don't want a real estate agent who you're playing phone tag with during a seller's market, because you'll lose precious time. You want someone sharp and responsive.
Submit a Clean Offer
During a seller's market, it's not a good idea to submit an offer with contingencies. A seller might be more interested in finishing things up quickly rather than getting a higher price for their home.
You can still protect yourself, even without contingencies. For example, maybe you get your loan completely underwritten. This means you go through the full loan process before you make an offer.
Let Go of Perfection
The inventory is really limited right now, and demand is high. This makes it even less likely that you're going to find the perfect home, and that's okay. It's sometimes better to buy a good home and then make it perfect rather than waiting for perfection to hit the market. There's a very strong chance that even when inventory expands, there still won't be a perfect home.
Be Disciplined with Your Budget
When bidding wars are possible, and things are competitive among buyers, it's easy to get carried away. You may get so emotionally attached to a house that you're willing to go well beyond your budget.
Set a budget, and don't let yourself go above it. Offering too much may get you the house, but it's going to create financial stress for you for years to come.
Offer More Earnest Money
Earnest money is something like a deposit and you provide it alongside your bid. It's a way to show the seller you're serious, but if the deal doesn't go through you can get that money back.
Usually, you'll see buyers offering around 1%, but during a hot market, think about offering more. It shows that you're more invested in the deal and less likely to let it slip through your fingers.
If you have the option to pay with cash, that's almost always going to win you favor. Cash offers take out the element of financing contingencies, and they make for a simpler transaction, which is beneficial for buyers. A cash buyer also tends to be more serious, and when you buy with cash you're not beholden to the lender through the closing process.
Don't forget: You can always hit "pause"
Finally, if you do enter the market and find that it's not working for you, consider waiting. It's easy to get carried away even in a buyer's market. A seller's market can be even more likely to lead you to make a poor financial decision.
Of course, it's tough to time the market, but if you do have some flexibility in when you buy, consider holding off.