7 Tips For Buying A Home In A Seller’s Market
It’s no secret that Southwest Florida is embroiled in one of the hottest seller’s markets we’ve ever seen. While it comes down to a simple imbalance of supply and demand, that doesn’t make it an easier pill to swallow for the buyers looking for their dream home right now.
Still, it IS possible to buy right now! Here are 7 tips for buying in a seller’s market.
#1 – Understand Market Economics
In a healthy, balanced market, we like to see a 6 month supply of inventory on the market. This gives sellers the opportunity to sell and move into something comparable, gives buyers plenty to choose from, and it creates a level playing field for negotiation.
When there’s more inventory, it becomes a buyer’s market. When there’s less, it becomes a seller’s market.
In February 2021, Lee County’s inventory fell 70% to just 1.3 months’ worth of available homes for sale on the market. This means buyers have very little to choose from, and sellers have a major upperhand in the game.
#2 – Put Your Best Offer Forward
With sellers receiving multiple offers, there is no room for negotiation in today’s market. Buyers need to put their absolute best offer forward, first. If you found your dream home and you’re willing to pay $5,000 over asking, make that your first offer.
Remember too, price isn’t everything. Savvy buyers will consider multiple aspects of an offer, including financing type, few (or no) contingencies, shorter due diligence windows, or quicker closing dates. Some buyers are even offering to waive appraisals or inspections altogether.
#3 – Prepare To Bid
Even with multiple offers over asking price, we’re still seeing bidding wars among buyers. Be prepared for your best offer to not necessarily be your final offer. Some buyers are including an escalation clause in their offer. This guarantees the seller that they will pay a certain percentage more, say 2-3% more, than the highest offer received.
Because bidding wars drive up sales prices, it’s a good idea to calculate that into your house search and look at homes that are listed about 10% under your budget.
#4 – Forget The Counter Offer
In today’s market, sellers simply need to look at the multiple offers they receive and pick the best one. If yours isn’t the best, it’s unlikely you’ll get a response, much less an opportunity to counter.
#5 – Cash Is King
Even though today’s interest rates are at historic lows, cash is still king in real estate transactions. If you can’t pay outright in cash, a higher than normal deposit or good faith payment can show sellers you’re serious. Where you might normally put down a $3,000 deposit, a $10,000 deposit makes a greater impression in today’s market.
#6 – Be Prepared To Cover The Appraisal Gap
The reality is that home prices are increasing faster than appraised values. Just because a buyer is willing to pay a certain price for a home, doesn’t mean it’s worth that much to a lender. A lender will only give you as much as the house is valued at.
If you’re financing the purchase and you’re willing to pay more for your dream home, be prepared to have cash in the bank to cover the appraisal gap: the difference between the contract price and appraised value.
#7 – Tug On The Seller’s Heartstrings
Numbers on a paper mean nothing to a seller. They’re simply choosing the best offer. But if you include a letter or video that talks about how much you love the home, how perfect it would be for your family, how you can just picture your Christmas tree in that one corner by the fireplace… well, it may be possible to win over the seller, even if yours isn’t the top offer!
The Link Team Can Help You Find Your Southwest Florida Dream Home
Things are moving fast, but we’re still finding our clients their dream homes every day! Contact Nina Link and The Link Team today to schedule a consultation, or start your search online now.