There is no doubt about it; we are experiencing one of the strongest seller's markets we have seen since 2007. A seller's market is created when the inventory of listed houses is smaller than the pool of active buyers for those homes. This lack of supply means buyers will be competing with numerous other buyers on the same home. This creates a fast-paced environment with quick decisions, high bids, and only one winner. But don't despair. Here are 14 things you can do to compete in a seller's market while protecting your financial interests.
Don't underestimate how important this step is, particularly in a strong seller's market. Here in Alberta, a mortgage broker can not give you absolute approval until you actually write an offer on a property. However, a good mortgage broker will have you fill out an application authorizing them to pull your credit bureaus and will have you gather all tax and employment information to give you an accurate pre-approval. Knowing what you are approved to buy is vital when competing with other buyers on a new listing.
Understanding the Bidding Process
Knowing what is involved in a multiple offer situation will help you remain competitive. Sit down with your Realtor and discuss what may happen when competing for a listing. Will you have a chance to negotiate, or should you put your best foot forward? Is it wise to write an unconditional offer? Will a "Sale of Buyer's Home" condition hurt you or protect you? The more informed you are, the faster you will be able to submit a strong offer.
List Your House
If you have spoken to a mortgage broker and know you must sell your house before you can buy, it might be best to put your house on the market now. If you are competing with others in a multiple offer situation on a property, putting a "Sale of Buyer's Home" condition will not help your offer. A Sale of Buyers Home condition protects a buyer from the possibility of owning two houses because if they do not end up selling their home, they are under no obligation to purchase the seller's property. If a seller sees your offer with this condition, they may choose another offer, even if that offer is for less money than yours.
If you do list your home and accept an offer from a buyer, your Realtor can now submit an offer on your preferred new property that has a condition of "Completion of Sale of Buyer's Home". This means that you, the buyer, have an offer on your home, and you are just waiting for the conditions to be removed by the buyer. This is a much stronger offer. The seller will have to wait for your sale to become unconditional, but they are not left wondering if you will get an offer at all.
It is not only the price that a seller considers when comparing offers on their home. Possession date can be just as important to some sellers. If a seller wants to move on quickly or needs a few months to organize their move, writing an offer where the seller sets the dates may give you a leg up in the competition. This may take some flexibility on your part, but if you can consider making interim living arrangements or speak to your mortgage broker about the possibility of bridge financing, giving the seller the possession date they want might result in you winning the home you want.
Preview a Few Options
When you do get an offer on your home, it is important to have a good idea of what is available for you to purchase. Having a few options in mind will make it easier to make a quick offer on a new property once your home is pending.
Know Your Budget
In a strong seller's market, you will likely have to pay over the asking price to have the sellers accept your offer. If you know there is a possibility of having to go over the list price to get a property, make sure you are looking at properties that are just under your budget. Having that extra money will allow you to compete without overextending yourself.
Don't Wait Until The Weekend
In an environment of multiple offers, where properties become pending the same day they are listed, you have to make viewing homes a priority. We have had many listings this spring receive offers within the first 24 hrs. If you are planning to wait and look at your top picks on a Saturday, you may not have any homes left to view.
Be Choosey, But Not Nit-Picky
You will never find a house that is absolutely flawless. Even if you build it yourself, there will always be a moment after you move in where you realize you forgot to include an important feature. But in a strong seller's market, you may have to be even more flexible. As a buyer, accepting a few DIY items may open up a few options.
Clarify Your Needs vs Wants List
Getting caught up in multiple offer situations and possibly losing out on a house or two can sometimes make a buyer feel a bit desperate. Desperation can muddy a buyer's Must-Have list. It is essential to be flexible with your Wants list, but if a fourth bedroom is the primary reason you are moving, writing an offer on a three-bedroom home because you are panicking is not the right move.
Don't Make An Unconditional Offer Without Careful Consideration
A clean, strong offer will probably win you the home, but sacrificing your peace of mind might not be worth the win. If you saw a few questionable home projects as you viewed the listing and you choose not to have an inspection, you may encounter some big bills in the coming years. Discuss any concerns with your Realtor. They may be able to come up with a solution, such as bringing a moisture tester or a knowledgeable friend on a second viewing, to help protect your interests.
Make Sure You Are Taken Seriously
Don't ask for personal possessions, such as an antique bench in the hall, or enter into a battle for something you could easily replace, like a beer fridge in the garage. Show yourself as a serious buyer by writing a strong, clean offer. However, in the rare event that a seller indicates they want to include some possessions in the sale, such as an additional bedroom suite or riding lawn mower, giving fair value for those items and relieving the seller of the task of putting them on Kijiji or marketplace may make your offer more attractive.
Don't Mess With A Good Thing
If you have been pre-approved for a mortgage, it is imperative to maintain your financial situation. If you were pre-approved for a set mortgage amount, and you choose to purchase a vehicle or change jobs, this might put your approval in jeopardy. Keep everything in your financial world stationary to avoid rejection from a lender.
Work With an Experienced Agent
Hire an agent who has experienced a variety of markets, will send new listings to you quickly, knows how to present a strong offer, who can "read the room", talk to the seller's agent, who will go to bat for you, and who will use their connections with fellow agents to find the right home for you.
You will find your dream home. It may mean losing out on a few homes or possibly waiting for the market to settle down a bit, but you will find the perfect home for your family.
There are a few more strategies you can employ that can protect you while giving you an edge over the competition. We would love to help guide you through this hectic but exciting time.