In a seller’s market, there are more buyers looking for a home than there are houses available. That means sellers may have an advantage, since multiple buyers may be interested in purchasing their home. If you’re looking to buy a house in a seller’s market, it’s important to know what to expect and to be prepared so you can avoid common pitfalls.
Before you start shopping for a house, you should get pre-approved for a mortgage. That means you will submit your financial information and supporting documents to a lender, and it will review them to decide how much you can afford to pay for a house. Being pre-approved will demonstrate to a seller that you are in a good financial position, can afford a house and will be able to move forward quickly.
The amount a lender pre-approves you for is not necessarily the amount you should spend. The lender may not consider all your monthly expenses, such as childcare, or other costs of homeownership, such as property taxes, private mortgage insurance, homeowners insurance, maintenance and repairs. Assess your overall financial circumstances to figure out how much you can comfortably afford to spend for monthly mortgage payments.
Make a Competitive and Realistic Offer
You want to get a home at a good price, but in a seller’s market, you may be competing with one or more other buyers who are interested in the same house. To have a better chance at becoming the new owner, you need to present a competitive offer right off the bat. If you try to start negotiations by submitting a low bid, you may not get a chance to negotiate at all because the seller may simply choose a buyer who made a higher offer.
Don’t make an initial offer for the maximum amount you can afford. In a seller’s market, bidding wars are common. You may find that because competition is fierce, the only way to win a bidding war is to offer more than the list price. That doesn’t mean you should go over your budget—it means you should focus on homes with asking prices below the amount you can afford so you will have room to negotiate. If another buyer submits a bid that is higher than what you can afford, be prepared to walk away and look for another house that’s a better fit for your budget.
Get Help From a Knowledgeable Real Estate Agent
An experienced real estate agent who is familiar with the local market can guide you through the process of looking for a new home. An agent can help you decide how much to offer so you can hopefully get the house you want at a competitive price without being outbid by another buyer. If you can’t find a home with the features you want in your price range, your agent may recommend that you consider another neighborhood or city with lower home prices.