Get a Pre-Approval Letter
Financing matters, especially when a seller is dealing with multiple offers.
A pre-approval letter is simply a notice from your bank that they would approve you for a mortgage, and it tells the seller that you actually have the funds to back up your offer. This takes a little more work on the front end, because these letters can take a little time to get, but it’s well worth it.
Simply hand that letter over to the seller’s agent, and they’ll have immediate confidence in you as a buyer. For sellers, you’ll know that an offer isn’t going to fall through.
Don’t Go At It Alone
In a seller’s market, it’s really easy to get wrapped up in the moment and cave in to a bad deal. A good real estate agent will keep you grounded in reality. They’ll also save you a lot of time and money. They’ll take care of all the heavy paperwork, and they’ll be your spokesperson in negotiations.
Not only that, good real estate agents have plenty of connections within their local market. Many will know of houses that are coming on the market before they’re featured online. This could give you a great advantage in putting in offers. Some agents might even know about housing only being marketed by word of mouth – houses that will never appear in listings.
Keep all these things and mind when you’re buying or selling. A good real estate agent is well worth the commission they’ll charge.
Don’t Waive the Inspection
If you’re a buyer, making sure you get the house you think you’re getting is, well, really important. That’s where a home inspector comes in.
For just a few hundred dollars, the inspector will examine the structure of the house, as well as the major systems, to make sure they’re up to standards. They’ll give you a report detailing their discoveries. So if the roof needs repairs, you’ll know it. If the hot water heater is on its last leg, you’ll know that too.
The seller will get a copy of the report, which you then can use for negotiation purposes. If you know you’ll need to replace the HVAC within the next year – a minimum cost of around $5,000 – you can factor that into your final offer.
Just like a real estate agent, a home inspector will make your life much easier. They are experts in their fields and know to look for issues the common homebuyer won’t think about.
In a hot seller’s market, buyers might be asked to waive the inspection to speed things up – or simply because other buyers are lined up behind them. For a buyer, that should be a red flag.
All that said, current market conditions means buyers will have to keep contingencies to a minimum. Contingencies are the contractual stipulations buyers and sellers must meet before the deal can close. As you might guess, sellers don’t like to have too many of them to deal with.
Contingencies can include such things as requesting a seller to make certain repairs or even a buyer needing to sell their current old house before being able to close on the new one.
In a hot seller’s market, those demands generally won’t fly.
Brush Up on Negotiation
While it’s true your agent will be negotiating price for you, it’s also important that you understand the basics.
Your real estate agent will help set your asking prices using relevant data. They’ll have comparative costs for similarly sized homes in similar neighborhoods to provide your negotiation with a starting point. For buyers, that same data will factor into any offer you make on a house.
Once you begin negotiations, you may be asked to make concessions that include: move-in date, closing date, or even throwing a few appliances or furniture into the deal.
Your agent should have a good sense, right away, as to whether the buyer is legit. Lean in to them as you negotiate what could be the biggest purchase or sale of your life.
Remember: Asking Price Is Just a Starting Point
In a seller’s market, rarely will a house go for the asking price.
If you’re the seller, you know that’s just the number a buyer needs to get in the door – the “cover fee” so to speak. If you’re the buyer, you should know that the house you’re interested in will likely go above asking, and be prepared for that.
It might just be a few thousand dollars over, or it could be 1 to 3 percent higher than the actual price. Your agent (noticing a theme, here?) will know the situation and should know you well enough to make sure you stay within your comfort level.
The bottom line: The seller will always have the advantage in a seller’s market. Whether you are buying or selling, keep this in mind throughout the entire process.
Make a Strategy
When buying or selling something as expensive as a home, you need to have a solid plan going in. And, in a seller’s market, your strategy should be even more foolproof.
As the buyer, you absolutely need to be realistic about how much house you can afford. Know your budget going in and be clear with your agent about it. If you know that a $250,000 home is your absolute ceiling, then you can’t afford to get in a bidding war that pushes the price to $275,000.
In a hot seller’s market, it’s easy to allow emotion to take over and let the adrenaline of negotiations lead to questionable decisions.
Be patient and trust your agent to guide you through the process that will help you find that perfect home.
by Robert Bruce @ The Penny Hoarder.