What do Buyers need to do in a Seller’s Market?

What do you do if you’re a Buyer in a Seller’s Market? Because supply is limited in a Seller’s Market, Buyers will need to be well prepared. There are a number of matters that they’ll want to make sure they plan for that include these 4 all important ways:

Obtain a Pre Approval for a mortgage BEFORE you even consider stepping out to see a home.

Although this is always recommended before starting any home search, it’s even more crucial during a Seller’s Market. Because Buyers will likely be competing with many other home Buyers, Buyers will need to find out every way in which to let a home Seller know that they’re ready, willing and financially able to buy their home. We’re not talking about a letter that the Buyer’s local bank drew up after a brief telephone conversation. This Pre Approval letter will indicate that the Buyer provided their financial documents such as bank statements and pay stubs, along with their most recent tax returns and their credit report was reviewed. Only after a thorough review of these items by a Lender can a determination of their financial ability be confirmed with the greatest of confidence. This does not guarantee that a Buyer will secure a loan, but it’s the best evidence of a Buyer’s ability early on. No Pre Approval letter, no home search.

Make sure their offer is well positioned against other Buyers.

This is completed by ensuring the Real Estate purchase contract is completed with no errors, including all pages with initials/signatures and required addendum’s, offering shorter time frames than the standard longest time frames for all contract contingencies, such as inspection and loan commitment periods and making sure to offer a larger escrow deposit that will show that a Buyer is serious about buying the home. And also, it’s a must to offer the most money according to the home’s value. Offering above list price is even a consideration, as long as it’s within range of the home’s market value. It will still have to appraise for the value of the purchase contract that is determined later after a contract is executed. Now is not the time to save a buck on a home that a Buyer really likes, because in a Seller’s Market there will certainly be another Buyer who will present their offer as recommended above and win the home. It usually happens that after a losing a few homes a Buyer will come around and follow the advice above.

Do not be nit-pickybuying a home in a Sellers Market

If an inspection reveals a number of small issues don’t try to bicker with the Seller in hopes of getting a price reduction or a repair credit. Do Buyers really want to lose a home they like over GFCI outlets that need to be installed or a leak under the Kitchen sink or a toilet that is running, or a few cracks in the decorative pool tiles. These are items that can all be fixed by a Buyer without having to rob a bank and certainly aren’t worth the risk of losing a home because a Buyer decided to ask for a repair credit for these items, just to try and be in control. Unless a Buyer is looking for a less than desirable home, being nit-picky on an offer will get you nowhere other than back out looking and waiting for a new home to come to market.

It’s best to refrain from asking for help with closing costs

You’ll often find that Buyers will ask the Seller for help in paying for the Buyer’s closing costs and other prepaid items, such as their homeowner’s insurance that is paid at closing. When a Seller agrees to pay this money it is simply coming away from what they’ll be netting from the sale of their home. If a Buyer offers $350,000 for the Seller’s home and then asks for a 3% Seller contribution, the net dollar amount to the Seller for the sale of their home is actually $339,500. (not including the Seller’s other closing costs).

A likely scenario will come from a competing Buyer that offers $350,000 but no help with closing costs when this Buyer better understands a Seller’s Market. If a Buyer NEEDS the help with closing costs then it’s best that they ADD the money that they need for closing costs to the purchase price so the Seller will net the $350,000. This way the Buyer is simply financing the help they need with the closing costs. This allows this Buyer to compete with the Buyer that doesn’t need the help with closing costs and can make their offer superior in other ways such as those described above.

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