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Posted almost 4 years ago

Buying a house in a sellers market

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You surely wouldn’t want to get caught off-guard in one of your ventures of buying a home, right? To be completely honest, it’s not as simple as choosing the property with the lowest price tag. One of the greatest hurdles you’ll probably encounter is buying a house in a seller’s market. To be fair, the state of the market is often unpredictable. When it changes, an investor’s home-buying strategy should also adapt. Using the same strategy each and every time for all of the deals you find might one day prove to be unsuccessful. Let’s take a look at a few things you could do to get the most out of your hard-earned money and ensure a seamless buying process.

HAVE YOUR PAPERWORK READY

In a seller’s market, homes usually don’t stay there very long. If you take majority of your time drafting documents, your chances of buying your dream home may be long gone by the time you finish the paperwork. Competition with other buyers will be at an all-time high so you’ll have to make sure that your offer stands out. To increase your chances of closing on the property of your choice, it’s ideal to get pre-approved and pre-qualified before you even start looking for homes.

This is of utmost importance since this is a good gauge of how much a buyer can realistically shell out for a home. It wouldn’t make sense shopping for homes listed at $200,000 if a buyer only qualifies for $150,000. That’s why having your paperwork ready not only makes it easier for you to look into properties within your price range, it also gives you a significant advantage over the competition as well because you’re good to go anytime if both parties agree with the final sale price.

BE FLEXIBLE

It’s common for a purchase offer to be rejected due to the presence of contingencies. To put it simply, the more contingencies a buyer has, the greater the chances for the sales transaction to fall apart. In a competitive seller’s market, you might notice that other buyers reduce the number of contingencies just to increase their chances of closing the deal.

For example, one common contingency is the home inspection. Although there are a number of reasons why a buyer would conduct their own inspection of the property, waving this requirement may sweeten your offer to your buyer. Keep in mind that by doing so, you basically agree to buying the property in its current condition or as is.

Before you place an offer, think of the maximum amount that you’re willing to pay, the compromises that you’re willing to make, and how flexible you can be when closing the deal. You have to remember that this isn’t the right time to ask for a lot of favors from your seller such as leaving a few of their utilities behind or asking a fresh coat of paint on the home’s interior although this is subject to a case-to-case basis.

START STRONG WITH YOUR OFFER

Like they say, money talks. This is evident in a competitive market. It makes sense for a seller to be enticed by a huge payout from a buyer, especially if it’s a cash offer. In order to start strong, consider the seller’s asking price first. If it falls within your budget, stick as close to their asking price a bit more to sweeten the deal. Avoid going overboard with your offers though, work within the limits set by your pre-approval form. Do not give low-ball offers unless you want them to look for more other buyers.

PREPARE AN EARNEST MONEY DEPOSIT

The deposit is 1%-5% of the property’s sales price that gets held in escrow until the sale closes. This gives the seller an idea of how committed you are in purchasing their property. While the earnest money deposit is a percentage of the sales price, you may encounter sellers that prefer a fixed amount such as $5,000 or $10,000.

Obviously, a higher deposit would prove to be more lucrative for your seller. However, set a limit to avoid putting your extra money at risk. Practice caution when placing an earnest money deposit because some of them are set to be non-refundable. This means that the seller gets to keep the deposit if the buyer fails to agree to the terms of the contract.

KEEP AN OPEN MIND

Buying a home can be stressful at times. A seller’s market doesn’t make it all the better. Ask yourself these questions to help you out: When does the seller want to close? Is the asking price too much to handle? Would leaving out contingencies guarantee my investment in the long-run? While it’s not always possible to get the picture-perfect answers to these questions, considering them will undoubtedly make a difference.

Rushing into things and being impatient wouldn’t work in your favor. Patience can be hard to come by when you feel the pressure to beat other buyers on closing a deal. Never get carried away so as not to hurt your financial well-being. Always keep your options open and learn to walk out of an unreasonable deal.

A lot of investors would suggest not buying a home during a seller’s market. Although it isn’t normally suggested, this doesn’t mean that you can’t. The best option for you would be to find professionals who do fair & square deals that work in your best interest regardless of the state of the market.



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