How Do You Buy a Home in a Seller’s Market?
First-time homebuyers face a multitude of challenges, especially when buying a house in a seller’s market. While conditions certainly change, record-low mortgage rates and a shortage of homes have set the perfect conditions for sellers to dictate the market price. This creates a seller’s market, and it’s a reality across most of the provinces in Canada.
Keeping this in mind, finding your dream home at the right price is possible in a seller’s market. In this article, we’ll go over the definition of a seller’s market and provide general instructions to purchase a home in these conditions. We’ll also share real estate tips for buyers looking for houses in seller’s markets across the country.
What Is a Seller’s Market?
Before going over the steps on how to get a house in a seller’s market, it’s essential to understand these distinct market conditions.
A seller’s market takes place when there is a surplus of buyers, which boosts the demand for homes. Fewer property listings mean more competition, leading to sellers receiving multiple offers or even starting an actual bidding war.
While seller’s markets are not negative for potential buyers that already own property, this type of market translates to higher home prices for first-time buyers. Sellers can ask for more money because there’s a shortage in the housing market and high mortgage approval rates, which means more buyers.
Now, this doesn’t mean that purchasing a house at a great price is impossible. If you follow the right buying strategies, choose your bidding wars carefully, and act fast on new listings, you should be able to find the perfect home.
How Do You Buy a Home in a Seller’s Market?
In this section, we’ll go over general steps on how to buy a house in a seller’s market. Before going any further, you should verify that the area you’re interested in is, in fact, a seller’s market. Even if they’re not common, it’s possible that you’re in a balanced market or even in a buyer’s market.
While the home buying process is technically the same, it’s important to consider a few elements before completing your first real estate transaction in a seller’s market.
There’s a chance you’ll need to make tough decisions and potential compromises in terms of what you’re looking for, so your first property should be your main priority during this entire process.
Here are a few general steps you need to follow to purchase a property in a seller’s market and still get great value. Note that each buyer is different, so adjust each step based on your home buying budget and other variables.
Do Your Research
The first thing you should do is thoroughly analyze market trend reports, understand the local market, and look at potential real estate agents to work with.
Having a deep understanding of the local market conditions will help you assess whether a property is worth the asking price. You should always evaluate the price of comparable properties in the area and find a real estate agent that knows the small details, like the difference between neighborhoods.
Create a Budget (and Stick to It!)
Many buyers may feel pressure from families when looking to purchase their first homes. That said, you need to create a house-buying budget and stick to it at all costs.
Now, it’s possible to make lifestyle changes and cut other expenses that may help you establish a bigger budget. But, you need to be realistic and adhere to your budget to avoid financial issues later on.
Remember, choosing a budget doesn’t mean that you automatically have mortgage pre-approval. If you want an accurate estimate, you should submit a mortgage application and get pre-approved. This way, you’ll better understand how much money you can borrow and the type of property you can purchase.
Know What You Want and Act on It Fast
Being patient and evaluating all the offers are not options for buyers looking for houses in seller’s markets. The best way to work around this is to know exactly what you want.
This is not an issue for experienced buyers, but first-time homeowners may not be aware of all the elements they want until it’s too late. Instead of falling into this trap, you should take the time to analyze your current living conditions and figure out what you want to have in your first home.
Once you have a clear idea of what you want, make sure to act immediately whenever you find a good fit. This may be tricky, but you need to be fast without making concessions you’ll regret later. Having an experienced agent by your side can simplify this process and handle negotiations on your behalf.
Start with a Strong Offer
There is no doubt that the financial aspect is crucial, but many elements make up a real estate offer.
Besides the proposed purchase price, your offer includes the type of closing (short or long) and any potential conditions.
Needless to say, sellers often prefer short closing processes that take less time. Most sellers also like to receive offers without any conditions, but this is tricky for buyers.
The reason is that any condition placed on an offer is usually there to protect the buyer. For example, a buyer may place an inspection condition, which states that a request may be reduced or retracted based on a professional home inspection.
The fact that there are fewer homes may feel like a good reason to forego conditions. However, you should always consult a knowledgeable real estate agent to avoid removing crucial conditions from the offer.
Adjust Your Expectation to Market Conditions
Housing markets are hard to maneuver and impossible to predict, so every first-time buyer should remain flexible and adjust expectations to the current conditions. Depending on the conditions, you may be forced to evaluate aspects such as the amount of property you’re buying, the neighborhoods you want to live in, and the size of your down payment.
Even though housing markets are unpredictable, real estate forecasts can help you prepare for potential changes.
For instance, recent reports indicate that more buyers have entered the market since the start of 2022, which can give sellers even more leverage. Because of this, your best bet may be to accelerate your plans and get pre-approved as soon as possible.
Partner with an Agent You Trust
Agents can provide valuable insights that go beyond knowledge of housing markets and trustworthy home inspection specialists.
By partnering with the right agent, you can minimize the amount of work you have to do, find exactly what you were looking for, and purchase property with below-average commission rates. Real estate professionals can also guide you through the entire house hunting and purchasing process while helping you maneuver challenging obstacles, like having a low down payment.
Don’t Give Up!
Home prices may seem daunting, and knowing that most sellers are evaluating multiple offers only adds more pressure to the buyer’s side. That said, countless families find their dream homes every year, so a high listing price and similar challenges should not discourage you.
Stay confident, choose a reliable agent, and don’t settle for anything less than a perfect fit!
Tips to Buy a Home in a Seller’s Market
Now that we’ve shared general steps to buy a house in a market ruled by the seller, let’s go over real estate buying tips for first-time homeowners.
Research All Types of Property in Your Area
It’s logical to only look at the type of property you envision yourself living in. Nevertheless, you should take the time to look at all property types in your area of interest. It’s the only way to know what features, amenities, and neighborhoods you can afford.
Not only does this give you a good idea of the value you should look for, but it gives you the confidence to place bids that are backed by the numbers.
Make Offers with Limited Conditions
Every seller will prioritize the offers that have the fewest conditions. Making an unconditional offer is also possible, but this can bring potential challenges later on.
Knowing what conditions to remove can be difficult, so your best bet is to work with an agent that is familiar with the local area to make the best decisions.
Shop Near, But Not at the Top of Your Budget
A house is the most expensive thing you’ll ever buy, but your first home doesn’t have to be your last. Instead of throwing everything you have at your first home, you should keep some financial flexibility and shop new, but not at the top of your budget.
Even if you decide that you want your first home to be your dream family house, shopping near the top of your budget will allow you to outbid competitors and gain more flexibility.
There is no doubt that purchasing a home in a seller’s real estate market is challenging. But with the right strategy and help from a trustworthy agent, you should be able to find the ideal home for your family at a fair price.
If you want to look for homes in different markets across Canada and pay below-average commissions, Justo is here to help.