Tuesday, September 16, 2014 / by Tom Nickley
Tips for Competing in a Home Sellers Market
The two questions on every homeowner's and buyer's mind in the current real estate climate are: is it a sellers’ market, or, is it a buyers’ market? The answer really depends on which locality you're referring to, but at-large, more people selling their home are getting their asking price, or close to it. Some markets, like Palm Beach, are in the midst of a seller’s market, and what's more, is that nationally, surely but slowly, home values are creeping up, making what was an across the board buyer’s market, vanish as the months roll on.
That's because the housing market is stabilizing. And, as inventory gets more lean, prices begin to rise. In layperson's terms, a buyer's market means that there are a lot of homes for sale at one time. So, in order to get an edge over the competition, home sellers have to lower their prices in order to compete with other homeowners selling what is essentially the same home. Meaning, it has nearly the same livable square footage, is in a similar neighborhood, has the same number of bedrooms and bathrooms, and is in nearly the same condition.
What that translates to is homeowners face so much competition that they have to provide incentives for buyers to put in an offer rather than for another home a block away. Remodeling a kitchen, updating the bathrooms, putting in new landscaping, and other cosmetic, but expensive, improvements become absolutely necessary. Reverse all that, and you've got a seller's market. Now, buyers have to do more to compete to get the home they really want.
The Seller's Market by the Numbers
Across the country, the real estate market is changing. And that's good news for the national economy, as well as state and local economies. In the latest data complied by various sources, including ZipRealty, just over 98 percent of seller's get their asking price.
Good housing-market news keeps rolling in. The latest says that the gap between the seller’s asking price and the eventual sales price is narrowing, and that homes are selling faster. While this is obviously good news for sellers, buyers should welcome it too. If homes are selling faster and prices are firmer, the buyer faces less risk of losing money on a home purchase.
How to Better Compete with Other Buyers
With such trends clearly developing, buyers can easily find themselves losing out in their home search. That adds more stress to an already stress filled situation. Here are some tips for beating out other buyers:
- Get serious about your credit. Pre-qualification documents won't get you anywhere in a seller's market. You need to get pre-approved, and, to have the best offer, clean up anything on your credit file that's limiting your purchasing power. Or, if you can swing it, start offering cash, which will put you up to the front of the line in a class all by yourself.
- Up the ante. Have your agent include an "escalator clause", which ups your offer to best new offers being put in by other people who find the home after you've honed in on it. Or, you can beef up your earnest money deposit to show the seller how serious you are about buying.
- Give the seller some time. In some situations, the seller has a time constraint or wants to remain in the home for a short period after closing, give them a "lease back" or "rent back" option.
- Pay for the extras yourself. Chipping in home closing costs are one such example, as are repairs.
Lastly, get personal and write a love letter to the seller telling them why you see yourself in the home and cite specifics.