The real estate market fluctuates often, making it tough to predict whether the market will favor buyers or sellers when it’s your turn to buy. Especially if you’re shopping for real estate in San Francisco, CA, or another market that currently favors sellers, you need to know some tricks of the trade to help ensure you don’t make any mistakes. Buyers in a seller’s market can get what they want, but they need to bring their “A” game — buying a house in a hot market isn’t for the indecisive. Here are six common mistakes many buyers make — mistakes that you can learn to avoid — when shopping in a seller’s market.
1.Not making your best offer:
The drive to buy what we want for as little money as possible is practically in our DNA. So when most people see the listing price of a home, they naturally wonder what they can really get the house for. Offering lower than asking price is a perfectly reasonable strategy in some instances, such as if the house is overpriced compared with other similar homes in the area, or if it’s a buyer’s market with lots of available inventory. But trying to get a deal when you’re in a seller’s market might not be the best idea. In a seller’s market, many buyers do not step up with a strong enough offer. There is usually a shortage of inventory, and the competition is usually fierce. I always encourage a buyer to come in with a strong opening offer.
2.Waiting too long to put in an offer:
Just as impulse-buying a home is risky, analyzing a home purchase to death in a seller’s market is inadvisable too. When you wait too long, you are at high risk of losing [the home] you have fallen in love with. Once you’ve determined the type of home you want, the location you desire, and your price range, and finally find a home that meets your qualifications, make an offer. To give yourself more leverage, be prepared to make a quick offer by having your finances in order — get a preapproval if you can. Know how much you can truly afford, repair any credit issues, have your down payment in hand, and delay [other] major purchases.
3.Not working with a seasoned agent:
In a seller’s market, it benefits buyers to get all the help they can. If you have a seasoned agent on your side, you’ll probably have a better chance of getting the home you want. Plus, in most cases, buyers don’t pay real estate agents; sellers do. When you are competing against other buyers in a fast-paced market, it is vital to be ‘offer-ready. Working with a real estate professional saves tons of time and stress, as they know the ins and outs of the process and can provide tremendous insight regarding upcoming inventory.
4.Not being prequalified (or better yet, preapproved) for a loan.
You might know that you’ll be approved for a mortgage loan based on your steady income, your low debt-to-income ratio, and your high credit score — but the seller probably doesn’t know that. The only way to prove to the seller that you’re a qualified buyer is to be prequalified from a lender. Prequalification is absolutely paramount. A buyer has zero advantage if they do not have the cash to purchase without a mortgage and haven’t taken the time to speak with a lender. Not getting prequalified sends a message to the seller that the buyer will lag on getting their ducks in order and aren’t taking their house hunting seriously.
Preapproval is a step above prequalification (where you simply tell your lender your financial story). The preapproval process involves submitting a mortgage application, complete with supplying verifying documents. Preapproval from a reputable lender is key. Presenting this shows the seller that the buyer has already set the wheels in motion and is serious about making [the deal] a reality.
5.Not being prepared for a bidding war.
If there is ever a time when a bidding war could be imminent, it’s during a seller’s market. No buyer wants to be involved in such a battle for fear of possibly going over budget. But, if you set your search below your max budget, you leave room in case of an over-asking bidding war occurs.
6.Not learning from your mistakes.
There’s no shame in learning that your offer has been declined, but it’s easy to get frustrated if your offers are declined over and over again. Learn from your last transaction(s) so you can get what you want. Buying a house, particularly for the first-time buyers, is a lot like dating. You probably have to let a few keepers slip through your fingers, have a couple sleepless nights over it, and then come back with serious intent to lock up the next greatest opportunity in front of you.