This is the real estate climate we're currently living in—and it has everything to do with the COVID-19 pandemic.
The COVID-19 pandemic has had a major impact on the real estate industry, and as a result, many parts of the country are experiencing what is known as a seller's market. The pandemic caused everyone to reevaluate where they're being quarantined. Take the simple fact that a home is no longer a home, the home is now a workplace as well. It's also a school. And that really has gotten a lot of people in a position where they've decided to pull the trigger and change the condition that they live in.
"Simply put, a seller's market is a marketplace in which sellers have a competitive advantage due to pent-up buyer demand and low home inventory levels,"
"Many suburban areas are witnessing market surges and increased demand as homeowners and renters choose to leave urban neighborhoods amidst the pandemic."
The largest buying group is millennials, since most are marrying and starting families, a phenomenon that is also contributing to the number of people leaving urban centers. Many of these buyers are looking at bedroom communities because they want better schools and a more relaxed way of life with a little more built-in distance between neighbors. And while much of that trend was happening before COVID it was just exacerbated by the pandemic and fueled with historically low interest rates.”
Although sellers may have the upper hand in these kinds of real estate transactions, there are still benefits to buying a home in a seller's market. Investors can purchase a property and rent very quickly to tenants or to sellers who have sold their houses but have not been able to find their next home. Additionally, in this current seller's market, interest rates are still low, so you also might be able to afford something that you couldn't in past years.
So here are a few things to keep in mind as you start looking in the current market:
While negotiating with sellers about renovations, repairs, and closing costs is common in a buyer's market, you should be prepared to purchase a property on the owner's terms when the ball is in the seller's court. The seller may want typical contingencies waived or removed with the offer, meaning a buyer should be totally prepared to get through the inspection process and/or contingency phase in a shorter than standard timeframe. Additionally, In very hot markets, a buyer may need to be prepared to buy without any contingencies all together. In addition, the seller may ask for things like a rent back period at a below-market rental rate."
Since you won't have a lot of room to negotiate in a seller's market, it's imperative that buyers have all their financial ducks in a row before touring or making an offer on a property. This means having your proof of funds or mortgage loan pre-approval documents in hand.
To find the best mortgage lender, reach out to your bank, local credit unions, and online lenders to compare your options. Ask each of them what they are offering for rates, loan terms, down payment requirements, property insurance, closing costs, and fees of all kinds. Make a spreadsheet and compare all of these details to pick the best option for you.
Ask any real estate agent and they'll tell you the same: Multiple offers are customary in a seller's market. Bidding wars can lead to closings above asking prices as sellers are positioned to choose between multiple offers. It is important that buyers move quickly in seller's markets to avoid overpaying; but it is equally as important to avoid making an impulse purchase. To ensure you don't overpay on a property you aren't particularly attached to it's crucial to determine exactly what you are looking for in a house, and the most you are willing to pay for it, before making an offer.
If you plan on making a low offer on a property in a seller's market, it’s time to reconsider.
Many buyers go into a negotiation wanting a deal, but in a seller's market, there are very few deals to be had. Sellers and their agents know that the demand is high and that they have very little competition, therefore low ballers generally lose. If you have your heart set on purchasing a property, we suggest offering above asking price if possible. Also come equipped with an escalation clause and other incentive to help sweeten the deal for the seller.
To better navigate the ins and outs of buying a home in a seller's market you'll need to enlist the help of a knowledgeable real estate agent. Buying a home in a seller's market can be stressful. This is not something a buyer should trust a novice agent to assist them with. Find a strong agent who is well connected in the marketplace, who will be sure to get you the very best price and terms possible without necessarily having to pay the most money.Cary W Porter on