Five Tips For Buying In A Seller’s Market
There’s no denying that we’re in a seller’s market. Every home you visit appears to sell almost immediately. This is because the inventory is at record lows, demand is growing, and prices are rising; it may seem daunting to even consider purchasing a home.
While there may appear to be strong competition among buyers, don’t panic; I know how to successfully navigate buying in a seller’s market.
As a mortgage specialist at Mortgages with Gary, I’ve put up a few tips to help you achieve your goals and buy your dream home. Keep reading to know more.
Tip #1: Know what homes are selling for in your desired area
In a seller’s market, the asking price is often of little use. That is because owners commonly underprice in the hopes of generating more interest and creating a multiple-offer situation, otherwise known as a bidding war. The listing price is just an offering to the market and has nothing to do with the value of the property or the final selling price. Buyers should focus on recent comparable sales.
An experienced realtor can tell you what similar properties in the area are selling for, and it is also important for buyers to familiarize themselves with the market by viewing multiple homes (virtually, if necessary) and seeing what features their money can buy. This gives buyers the confidence to bid aggressively.
Tip #2: Consider making a bully offer
In a seller’s market, you need to be quick. When a home comes on the market, you need to see it immediately because many won’t reach the offer date. Bully offers are one of the primary strategies buyers should implement in a seller’s market. Being first with an offer presents the seller with an enticing proposition. Should they wait for other offers, but don’t get any offers as good as yours, urging you to go on and buy something else, they would then be out of luck.
Tip #3: Make an offer without any conditions
When you are up against multiple other buyers in a seller’s market, your offer must be unconditional to be competitive. After all, why would a seller choose an offer that is conditional on the buyer obtaining financing or on getting a home inspection completed if there is a selection of unconditional offers available to the seller?
This means having a mortgage pre-approval in place. Step one of the purchase process should be contacting a mortgage professional to verify your income, down payment, and credit history before beginning to shop for your home purchase.
Tip #4: Re-evaluate your options
If you are getting frustrated because you keep getting outbid, it may be time to review your wish list. Consider revisiting your preference for home size, location, amenities, or price.
Also, communicate regularly with your mortgage agent. Sometimes, re-allocating some of the funds that were originally intended to be used for a down payment could be better used to pay off other debts such as a car loan. This could lower your debt-to-income ratio and allow you more borrowing room to qualify for a larger home purchase.
Tip #5: Do not shop at the top of your home-buying budget
In a seller’s market where prices are increasing rapidly, there’s a possibility your lender will appraise the home’s value below your purchase price. The problem is because lenders will only lend you up to 80% of their appraised amount, you can end up in a difficult situation if you shop at the top of your budget.
Say, for example, you have been pre-approved for an $800,000 mortgage, and you have a $200,000 down payment. So, you go ahead and bid $1 million on a property, and your offer is accepted. If the appraisal then values the home at $950,000 instead of $1 million, the lender will only lend you $760,000 (80% of $950,000), even though you were pre-approved for an $800,000 mortgage. Where is the extra $40,000 going to come from to close the purchase?
Perhaps you can borrow from an alternative lender or from your parents. However, if those options are not available, you won’t be able to close the deal, and you will not only lose your deposit but could also be sued for damages if the home ends up selling for less than you offered.
If you are looking for a mortgage agent based in London and Windsor, Ontario, then reach out to me at Mortgages with Gary. I have significant years of professional experience in the financial services industry, working with clients helping families achieve the dream of homeownership and financial independence. I have a reputation for building strong relationships centering on integrity, transparency, and delivering client service excellence. I provide a wide array of solutions for clients, from working with first-time homebuyers to experienced clients looking to refinance, purchase a second home, or investment property.
My services are available to clients across Windsor, LaSalle, Amherstburg, Kingsville, Leamington, Tecumseh, Essex, Lakeshore, Chatham-Kent, London, St.Thomas, Strathroy, Sarnia, Woodstock, Brantford, Stratford, Kitchener, Waterloo, Cambridge, and all over Ontario.