You have probably heard that in many segments of the real estate market in Massachusetts it is a hot sellers market. As a home buyer navigating a hot sellers market can sure be frustrating. This article will help home buyers identify and navigate a red hot seller’s market.
Define A Seller’s Market
I have written other articles on understanding real estate markets. But let’s quickly define a sellers market.
A sellers market is when the amount of inventory on the market will be absorbed by the market in less than 5-7 months which is defined as a neutral market. A 5-7% absorption would be considered a neutral market.
Currently in many markets we are experiencing an absorption rate of 2-3 months. Consult with your real estate agent to see what you should expect for current real estate market conditions.
The quicker the inventory is being absorbed the stronger the market.
The Downside of a Seller’s Market for Home Buyer’s
Let’s take a look at what some of the challenges that are created for home buyers in a seller’s market.
A hot seller’s market could see inventory that is well below normal. There are less houses for home buyers to choose from. For example the Tewksbury Real Estate Market for condominiums traditionally runs 18-30 condos on the market where the past year we have been seeing inventory from 5-10 units at any one time.
There are just less homes for home buyers to choose from. There are more homes than home buyers.
Because there are more home buyers available than homes, it creates strong competition among buyers. Other home buyers probably want what you want….. a home in a good location, affordable and in good shape. Good homes are coming off the market in a matter of days with many selling for over asking price.
Because buyer’s are fighting over homes you will see many homes that have multiple offers submitted immediately upon hitting the market.
Very Low Market Times
With a lack of inventory and high buyer demand for good houses they come on and off the market very quickly. Many homes will go under agreement in under 7 days with the average being under 30 days. We have not seen market times likes this in ages!
8 Tips for Home Buyers to Navigate A Red Hot Seller’s Market
In a hot seller’s market you don’t have time to waste. Before even looking at homes get a mortgage pre-approval. A seller won’t wait for you to get a pre-approval because there is probably a line of buyers behind you that are prepared and ready to go.
If you are a first time home buyer, or a buyer that hasn’t bought in awhile, review all the contracts and paperwork prior to even writing an offer. You do not have time to delay when the right house comes around.
Understand the Real Estate Market You Are In
Understand the real estate market you are dealing with. Markets vary from town to town or even different parts of town. Even with in the same town different price range react differently to the market. When you take the time to understand the market you are in, it will give you in idea of how to react and what is a head of you.
This is on huge mistake buyers make. They take months to learn the hard way where the market is at while every month that goes by the market is increasing in price plus interest rates could rise.
Have the Proper Home Search Tools
Contact a local agent and get set up so you can search for homes that meet your criteria. My own home search updates every 15 minutes directly from the Massachusetts Multiple Listing Service. This is critical. A buyer can go into a saved search through out the day and see if any new homes have come on since they last logged in.
Make sure you sign up for daily email alerts. Homes matching your criteria that are new to the market will be sent to your email. The email alerts will become your best friend in a sellers market. The emails notify you of any new properties daily. Put a plan in place and learn how to to fully utilize your home search tools.
****** Tip Zillow and Trulia are not the tool for this!! It can take up to three day for a new property to show up on these sites. Often the property will already be sold by the time they show up Trulia and Zillow.
Time is of the Essence-
Don’t expect to see a property pop up online on Monday and think it will be around when you schedule a showing for next Saturday or plan to attend the open house on Sunday. If you are serious about buying a home you must get into the property immediately.
The really good properties are swarmed by home buyers immediately.
React quickly when you see a house you like. You may not have a day or two to think about it, because most likely it will be gone!
Be Flexible in Your Search Criteria-
Because inventory is less than half of what it normally is be flexible in your search criteria. Expand your criteria to include secondary towns. Also don’t be so stringent on home specs like bathroom count or acreage.
Look at all the homes that might meet your base criteria and don’t automatically discount homes that don’t look perfect on paper. For example you might put in two full baths but maybe 1.5 will do. Or you may want a half acre of land but something less may suit you just fine. Be open and flexible.
Look at Homes In a Lower Price Range-
If your top number is $400,000 and you find every home is going over asking in that price range think about lowering your upper end price range.
Don’t ignore the 400k homes but really start looking at $350,000 to $375,000 to give you room to go over asking.
Step Up and Make a Good Offer-
A hot sellers market is not the time to negotiate hard with a contract filled with contingencies and low ball offers. You will be competing with other offers and buyers. Show the seller you are serious by submitting strong offers.
Take the time and understand what can happen with multiple offers… at the end of the day the seller can pretty much handle them any way they want.
Change Your Negotiating Mindset
When you are in a balanced or a buyers market it is not unusual to negotiate for the best price you can. You have time and don’t usually have the pressure of other home buyer’s breathing down your neck. It is just you and the seller negotiating.
In a seller’s market you need to change your mindset. You need to negotiate to get the home you want! Not only is it you and the seller negotiating you now have other home buyers in the mix. I have had up to 18 offers on one of my listings.
At the end of the day what is the difference of $10,000. Say a home is priced at $300,000 you offer $295,000 just because you have to try and get a discount. But $305,000 would ensure you got the house. $10,000 translates into only $50 a month in mortgage payment.
You Won’t Win Them All-
Go into buying a home in a hot seller’s market realizing you will probably be in a multiple offer situation and you won’t win all the time. It is not unusual for home buyers to make offers on multiple homes before they have one accepted.
If you don’t try you certainly won’t get it.
Final Thoughts on Buying a Home in a Seller’s Market
Buying a home is stressful under normal circumstances. Trying to buy a home in a hot seller’s market is enough to drive anyone batty.
Being prepared and having knowledge will go a long way for you as well as understanding that time is of the essence when buying in a seller’s market. Also, realize you don’t have to go it alone. There are a ton of competent buyers agents that can help you navigate the a hot sellers market.
Other Real Estate Resources for Buying in a Sellers Market:
- Justin Culley 5 Strategies for Multiple Offers
- Lynn Pineda How to Buy A Home in a Seller’s Market
- Karen Highland Advice for Home Buyers in a Seller’s Market
- Bill Gassett Home Buying Tips
- Kyle Hiscock How to Buy A Home In A Seller’s Market
Excerpt From a Recent Home Buyer Testimonial
We had a very specific goal and did not want to buy over a certain amount. Kevin just said, ok lets do this! He never once pressured me to buy at full pre-approved amount, which we firmly did not want to do.
He also (in a sellers market mind you) got a sold “as is” seller to fix things that I was sure they wouldn’t. He got the condo association to take care of things I was sure they wouldn’t and he took on tasks I never would have thought of.
8 Tips for Home Buyers to Navigate A Red Hot Seller’s Market, was provided by Kevin Vitali of EXIT Group One Real Estate of Tewksbury MA. If you would like to sell or buy a home, give me a call at 978-360-0422 and let’s get the process started.
Want to know how the Real Estate Market is doing in Your area? Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford