How Do Home Buyers Win in a Seller’s Market?
Buying a home in a competitive seller’s market can be an uphill battle for the unprepared home buyer.
This article will arm you with the tools, tips, tricks and strategies used by professional loan officers and real estate agents to give you a leg up in a competitive seller’s market.
- What is a Seller’s Market?
- Dirty Tricks by Smart Sellers
- How to Beat Out the Competition
- Trust an Experienced Buyer’s Agent
- Avoid Big Box Lenders
- Setting Yourself up for Success
What is a Seller’s Market?
Real estate markets are cyclical. This means that home prices and interest rates will inevitably rise and fall as the economy navigates inflationary and recessionary shifts.
Depending on what cycle we are currently in, either buyers or sellers have the upper hand.
What is an upper hand? Let’s start with a buyer’s market. In a buyer’s market, there are many more homes for sale than there are buyers looking for homes.
For contrast, let’s look at a buyer’s market. In a buyer’s market, sellers much offer incentives to buyers in order to attract more attention. The most common methods that sellers use to attract buyers include lowering the sales price, and offering to pay closing costs.
In a seller’s market, there are many more buyers in the market than there are homes for sale. In this scenario, multiple buyers means that sellers will take the highest offer, and rarely have to offer to pay closing costs.
2018 is most certainly a seller’s market. If you are currently trying to buy a home, you know what I mean. If you’re just now trying to buy a home, this article will help give you a competitive advantage, and help you beat out the competition.
Dirty Tricks by Smart Sellers
Just to be clear, sellers are not doing anything wrong here. All any seller wants is to get the highest sales price for their home.
One of the most common “tricks” that smart sellers participate in today is that of strategically pricing the home in an effort to create a bidding war among buyers.
Sellers often think that their home is worth much more than what someone might pay for it. Smart sellers understand the nature of a sellers market and will price the home lower than what they would like to sell it for.
Having a lower price than the other homes around the area will attract more buyers. More buyers means more competition. More competition means that each buyer tries to outbid the other buyers.
The result? The home sells for what the most motivated buyer will pay for it, which is most often more than they would have listed it initially.
If you are not familiar with this strategy, you will fall for the initial, artificially low listing price every time. If you are consistently being outbid, and becoming frustrated with the home buying process, understanding this strategy could help you become the winning offer.
How to Beat Out the Competition
There are several things you can do to beat out the competition in a seller’s market. Any one, or all of these strategies will will give you an advantage over buyers that do not know how to “play the game”.
Lead With Your Highest and Best Offer – Being the first to make an “asking price” offer is not always the best strategy in a seller’s market. This is especially true if the seller is using the “bidding war” pricing strategy we just discussed.
Get a Full Underwriting Approval – Most lenders will offer a full underwriting approval in today’s market, leaving only the property related conditions to be cleared before you are clear to close. Having your loan fully underwritten will also allow you to close faster, which is a competitive advantage if the seller is looking to get their money as fast as they can.
Hire an Experienced Buyer’s Agent – This is perhaps the most critical of these competitive strategies. If you are not being guided by an experienced buyer’s agent, your chances of having your offer accepted goes down considerably.
Trust an Experienced Buyer’s Agent
Making a competitive offer has as much to do with your loan officer and loan approval as it does working with an experienced buyer’s agent.
Buyer’s agents specialize in representing home buyers. An experienced buyer’s agent is familiar with the community, the market, and usually knows most of the seller’s agents that represent the home seller.
If your agent already has a relationship with the selling agents in the community, they can often get your offer considered above an offer from a buyer that is represented by an agent they do not know.
Why is your agent’s relationship with the seller’s agent an advantage? It’s simple, if your agent has a history of bringing qualified buyers to the table, the seller is that much more confident that the sale will go smoothly.
An experienced buyer’s agent can also help you determine the right price to offer, which is not necessarily the price that the home is listed at.
I cannot stress enough the importance of working with an experienced buyer’s agent. Even if your agent does not have a relationship with the seller’s agent, professionalism and experience will stand out when compared to an offer from an inexperienced or unprepared buyer’s agent.
Avoid Big Box Lenders
All mortgage companies are NOT created equal. Big box lenders that advertise on TV, radio and the internet, often only target a very narrow qualifying criteria.
These popular lenders spend millions of dollars on marketing and advertising, only to dump you into a call center and put you in the hands of an inexperienced customer service telemarketer posing as a loan officer.
Big box lenders try to convince unsuspecting consumers that it’s the lender that matters, and never mention the fact that your loan officer is the gateway to you getting the best mortgage.
An inexperienced, “sales quota” motivated loan officer is much more likely to miss something that could cause challenges while you are in escrow to buy your home.
Almost every single time I get a phone call or an email from a panicking home buyer that their loan was denied a few days before they were supposed to close, it’s because of an inexperienced loan officer.
Either the loan officer did not know the guidelines, or missed something that would be obvious to an experienced loan officer.
You should avoid these types of lenders at all costs if possible. They do not offer lower rates or better service, but they do have more money to convince you that they do.
Set Yourself Up for Success
The absolute first step to making competitive offers, and having a smooth, stress free home buying experience is to work with a professional loan officer.
Once you find an expert loan officer that you trust, ask them for an introduction to a local real estate agent that they trust. Even if the loan officer is not from the community that you’re buying in, they will still be able find an agent that rises to the level of professionalism you deserve.
Not sure where to find a professional loan officer that you can trust? You’re in the right place!
If you have any questions or comments about this topic, feel free to leave a comment below, or you can shoot me an email at email@example.com.
Now sure how to identify a professional loan officer? Watch these expert interviews I’ve done with professional loan officer friends of mine.
I firmly believe that once you hear how a professional loan officer communicates, it will help you to avoid silly mistakes and errors that are common with inexperienced or uneducated loan officers.