The lack of homes for sale around Wisconsin is making home buying a challenge this spring. This is because we’re currently in a seller’s market, where there’s a shortage of properties in the face of rising demand, resulting in pricing power for the seller. In this environment, when a home lands on the market, it’s not uncommon for there to be a bidding war among the buyers before the home is sold for well above asking price, typically a few days or weeks later. This can make the home buying process challenging and, at times, discouraging. We’ve put together the top 5 tips to navigate a seller’s market to help you succeed in the competitive market this spring.
Getting pre-approved for a mortgage is not only a great first step for any buyer, but it shows the seller you’re a qualified and motivated buyer. The process is different from getting pre-qualified, as pre-approval requires running credit reports and other documentation to determine how much your lender is willing to lend you. Plus, you’ll know just how much house you can afford, putting you a step ahead of other buyers in the market.
[Related post: The 6 Steps to the Mortgage Approval Process]
Although working with a real estate agent isn’t required, we highly recommend it, especially if you’re a first-time home buyer. Qualified and experienced real estate agents will help you make the right offer and save you time and money. Finding the right agent is important, which may take some dedicated time and research. When searching, ask your friends and family for referrals, look at reviews online, or look for agents’ contact information attached to ‘sold’ signs in desired neighborhoods. During interviews with prospective agents, be sure to check his or her credentials and ask to see a list of homes they’ve recently sold.
In a seller’s market, a home that’s listed today could easily be gone tomorrow. This means that buyers need to be proactive when looking for homes, and not wait until the weekend to visit open houses and showings. This also means you shouldn’t fall in love with a home because you could easily be outbid by another buyer. When you’re ready to move forward, consider making an offer on the spot with your agent, as this will help speed up the process and beat other buyers to the punch.
A competitive market is also not an environment to negotiate on repairs, or request favors such asking to keep major appliances like the washer, dryer, and fridge. To prepare for some of the extra costs you can expect to incur when purchasing a new home, consider setting up a dedicated savings account or an adult piggy bank system while you’re beginning to look for a home. By the time you close, you’ll likely be well on your way to financing those furnishings and appliances.
Finding out the seller’s priorities, either by asking the seller directly or through your agent, can give you a big advantage over other buyers. It can be easy to assume that a seller’s biggest priority is to make top dollar, but not all sellers are the same. A seller could be relocating to a new city, in which case selling their home quickly might be their top priority. If you can show that you’re willing to accommodate those priorities, it can make you more competitive and a more attractive buyer to the seller.
In a competitive environment, you may only get one chance to make an offer on a home, so be sure to lead with your highest and best offer. Work with your real estate agent to determine an offer strategy, one that you believe is both fair and competitive. If there are multiple offers on a house, consider including an escalation clause, as it will increase your offer price by pre-set increments up to a predetermined maximum in order to beat out the competing offers.
"Just wanted to send you guys a quick email to thank you for making this the easiest mortgage loan application process I've ever experienced! I've worked with mortgage companies in the past and got hit with hidden fees I didn't expect. I want to thank you for being upfront with everything and for making this a simple and straightforward mortgage experience."
- Wayde E.