Spring. Abundant greens. Budding flowers. It’s beautiful, right?
Not if you’re thinking about buying a home!
I know. Buying a home is supposed to be fun. It’s supposed to be exciting. It’s supposed to mark a new chapter in whatever your book of life is. A beautiful lawn, majestic trees, two and a half baths – this is what the American Dream is made of.
If you want all the things I just mentioned to come to fruition, you’re going to have a lot of work to do. Bear with us through this post. We know it’s long, but it will pay off in spades if you plan on making a purchase this spring:
The Concept of Market Balance
There are two kinds of markets: a buyer’s or a seller’s. And this won’t blow your mind: whoever has market conditions on their side has the advantage. A buyer’s market suggests more sellers than buyers, and vice versa.
We can give you any number of metrics that should tell you who’s in the strongest position, but the most important measure is the number of homes available, aka inventory. Real estate inventory is measured in months of supply, which tells us how long would there be an available supply of homes to buy, if no new homes were to come to the market.
Inventory right now is low. Like, really really low. This has an impact on the discounts that sellers are willing to take on their homes. This also plays out in the length of time a house remains on the market. It can shrink by a factor of three in the tightest of markets.
That’s where we are now: a definite seller’s market.
Buying in a Seller’s Market
So if you’re thinking about buying in the near future, you’re gonna need to be determined. Just because something is hard doesn’t mean it’s impossible. Yes, buying in a seller’s market, especially when inventory is this tight, will be hard. But if you’re prepared, you can do it.
There are plenty of ways to do this and be successful, meaning you get the house you want at a price you can live with and still come out the other end with some measure of sanity.
Adjust Your Mindset: You’re going to have to adjust some expectations— maybe all of them. The behavior of your average seller will change when he knows he’s in a favorable market. He might take his time responding to inquiries, might not honor deadlines, might refuse to make the repairs he should. It’s the kind of behavior that can cause some ill will.
That’s a big reason why it’s so important to be objective. Houses are homes, and homes engender emotion. Anger is always a potential, but it won’t help you. And if you push aside that emotional element, you’ll realize that there are so many houses in the market, and that nearly 20,000 change hands every year. So if a transaction starts to go bad, don’t get upset.
Know Your Market: Your ability to navigate the marketplace will be driven by how well you know that marketplace. It’s not enough to just do some internet searches and assume you’ve got it. You’ve got to go see houses. You have to get a feel for neighborhoods and submarkets. It will take time, and it will be exhausting. But when you do this, you’ll feel a lot more confident when you see that house you want and make a bid.
And you can’t get to know one submarket and then automatically know the entire
region. Midlothian will be quite different from Church Hill. So make sure you understand what is going on in the specific market that is the target of your focus. (Pssst! We can help you use the proprietary tools within MLS to help you assess your specific market’s balance.)
Beware Comparable Sales: We’ve heard plenty of conversations where a buyer cites a sales price from nine months—or six months or even three—as the foundation for her bid. And that is trouble.
It’s tempting to think comparable sales all carry equal weight, but you’ve got to look beneath the surface. There’s a lot more that goes into arriving at the true market value — the interest rate, inventory, absorption, buyer and seller motivation. All of these play a part in driving the sales price.
A much better gauge of market conditions is recent listings that have gone under contract, (though you can’t necessarily use last season’s values as the gospel when it comes to a fair offer price when the market is accelerating).
Be Prepared, Move Fast and Offer High: As you start getting ready for your own entry into this market, you might get a little unnerved by how quickly things are moving. You want to seize any advantage you can find.
If you see a property you know you’re interested in, don’t pause for a second. Don’t let the sellers get comfortable with other possible buyers. When that home you want launches on the market, drop everything and CHECK IT OUT!
Too many times I’ve seen people wait for a weekend open house and find that there are many interested parties already there upon arrival. Be first and see what you can get cooking.
Winning with Terms: There’s more than one way to judge the success of a real estate purchase.
A contract is roughly 10 pages and only one is dedicated to price. The other nine have to do with the broad array of terms of the sale.
Don’t get me wrong, price totally matters! But the other things you’ll negotiate are pretty important too. If you can find out what a seller needs, it’s possible to use that to your advantage and craft a better deal.
One thing every seller wants is certainty. By doing away with as many contingencies as possible, you’re strengthening your offer compared to others. By putting down a lot of money or doing away with appraisal clauses, you’re making your offer that much more attractive.
Same goes for offering flexible closing and/or possession dates… There are lots of strategies for winning a bidding war, and we’re happy to help discuss those in more detail if those situations arise.
Plenty of Fish…
If it doesn’t work out, don’t worry too much. Someone wanted it a little bit more, and there are so many other fish out in the sea.
You can never be sure of the price everyone else has offered—or their own clauses or special offers to sweeten the deal. Once in a while, you might get a hint from the listing agent, but most of the time you’re operating with limitations.
Summary
With the kind of market we’re in, there’s a lot of information to parse through. And if you want to be in the best position to succeed with your home-buying goals, these are things that you need to know.
You’ve heard the term “tools don’t make the carpenter”? Well, the same goes for licenses and agents. Find one who really understands all the nuance behind winning offers—and understands that a strategy that works on one situation won’t necessarily work on another. An agent with a strong record—i.e., lots of happy customers and referrals—is worth his weight in gold.
We like to think that’s us, but you be the judge! Get in contact with us today… if you think you’re ready to dive in.
