Right now, many parts of the country are experiencing a tight housing market. If you’re planning to buy a home, there are things you can do to avoid the pitfalls awaiting unprepared buyers.
What is a Tight Housing Market?
A tight housing market is also called a seller’s market. That’s because there are more buyers looking for homes than there are homes on the market. When the inventory of homes on the market is low, sellers are in a better negotiating position than buyers are.
Sellers tend to be more firm on their asking price, and sometimes they see multiple offers at the same time. In really hot markets, homes are sold very quickly — sometimes the same day they’re listed. In addition, buyers can get into a bidding war and end up paying more than the listing price. As a buyer, you need to be ready to avoid the pitfalls that buying in a seller’s market can present.
Position Yourself for Quick Action
Since homes in a hot market don’t stay on the market long, you need to be prepared to move quickly through the home buying process.
Start by hiring a professional and tech savvy real estate agent to represent you. Your agent should use a smart CRM to make sure you see new listings quickly, communicate efficiently concerning your interest, and optimize your time in the home search process.
You also need to get your financing set up. Choose a mortgage lender and get pre-approved, so you won’t need to waste any time with financing issues when you find a house you like.
Identify a Budget and Don’t Budge
One of the biggest pitfalls a buyer can fall into in a tight market is getting caught up in the excitement of winning a bidding war. When you do that, you’ll be tempted to throw your budget to the curb and concentrate on winning! You won’t feel the pain until you realize that you’re devoting too much of your financial resources to buying and maintaining a house. Even in the heat of the moment, know when to walk away from a deal if it’s taking you above your budget.
Know What You Want
In a tight market, there’s often little time to think about the features of a home and decide whether it will match your wants and needs. By the time you finish that process, a potential house option will probably be sold.
Avoid that pitfall by making a list of what you must have in a house and those things you want. You may want to take a few weekends to cruise open houses in your target neighborhood. Look at the layout of different homes and the amenities they offer. Then, when you start looking in earnest, it will be much easier to walk into a house and know whether it’s for you. You’ll quickly spot the things you can’t live without, and the things that are absolute deal breakers.
Don’t Plan on Long Negotiations
Make your best offer the first time around. The seller will probably be reviewing multiple offers and you want yours to stand out. In addition, limit the contingencies on your offer to make it as clean as possible. For example:
- Don’t make an offer contingent on selling your home
- Don’t ask the seller to pay closing costs
- Don’t ask for major appliances if they aren’t included with the home
Make Decisions Quickly
If you see a home that meets all your needs and wants, and is within budget, make an offer. With fewer homes on the market, it could be a long time before you see such a perfect match again. If you take time to “sleep on it,” you may well lose the house to another buyer.
You Can Buy Successfully in a Tight Market
You don’t need to wait to look for your next home if the market in your area is tight. Educate yourself on the best strategies to use, and you’ll be relaxing in your new home before you know it.
Jeremy T. Holt | RE/MAX | Sarasota, FL