You're a buyer. You've been shopping for months. You've submitted offers on home, but you keep losing out. WHAT IS GOING ON!?
I'm sorry to tell you, we are in a Seller's Market. A seller's market happens when demand exceeds the supply. We currently have two weeks of inventory in the Denver & Metro Areas. Crazy, right? This is significantly down from this time last year. Part of this is Covid related, part of this is Colorado real estate in the winter. 2020 brought along a record drop-in mortgage rates that ignited the current buying frenzy, which in turn has driven home prices up. Sellers are at an advantage. Homes are selling faster and buyers are competing in multiple offer situations. These market conditions have buyers willing to spend more on a home than they would otherwise.
Well, what can I do as a buyer?
Be prepared, talk to a lender. Don't just get prequalified, get preapproved! You want sellers to know that you are a serious buyer, you can compete and your offer is good to go right now. It's becoming more common for sellers to request a lender letter with all offers. If you don't know where to start, I can provide you a list of lenders. Remember, do your homework, talk to more than one lender to find the best rate. Shopping around for the best rate is ok, it's actually really smart and highly encouraged!
Do your homework.
Your real estate agent and lender are great resources, but you still have homework to do on your own. Read anything you can about the neighborhoods you like, the schools, market trends. Thanks to the internet, you'll find an endless supply of credible sources that can help educate you as a buyer. Don't forget to talk to any of your friends that recently sold or purchased a home. Make sure you have a clear understanding of costs that will be associated with your real estate transaction, such as inspection fees and closing costs.
I want a deal!
Well, I'll just be direct with you. That is probably not going to happen. In this market, sellers hold the upper hand, even more so in the below $750,000 price range. Sellers are working with knowledgeable real estate agents who are advising them on the importance of properly pricing the home according to current local market trends. They are comfortable listing their home at fair market value, knowing they will receive multiple offers. I am seeing homes go for 3-14% over list price in a matter of days. A lot of homes are listed on Tuesday or Wednesday as "Coming Soon", hitting the active market on Thursday, allowing showings Friday through Sunday and expecting all offers to be submitted by Sunday evening. It is a fast and furious market, it can feel intense and stressful for buyers.
When our parents were buying homes, the trend was for sellers to list their homes high with the expectation that they would have buyers negotiating them down. There was a lot of back and forth haggling. Buyers felt like the victors. Still to this day, you are probably hearing stories from your parents or grandparents about how they talked that seller down several thousands of dollars. Times have changed, that just isn't the case anymore.
Get to know what YOU see value in.
You want a 3 bedroom home with 4 bathrooms, a basement, a 2 car garage with enough room for a workbench, a kitchen big enough to entertain all your family and friends. The home needs to be modern and fresh, like the homes on those home renovation shows. Oh, and don't forget the impressive outdoor space, a must have for summer BBQ's. Unless you custom build a home, you aren't likely to get everything you want. Consider starting a home-buying checklist to organize what you want versus what you need. Which is most important to you, home location or home price? Keep in mind that limiting yourself to a particular neighborhood or style of home can limit your options and you'll have to be more realistic in your wants and needs. If you happen to be looking for a 1930's Victorian in a historic neighborhood, you may be hard pressed to find a 4 bathroom home or a garage that fit 2 modern day cars.
Submit your highest and best offer ASAP.
Once you have found the home you like, you will need to act fast. Be serious and submit your highest and best offer. Some sellers lose out because they spend too much time over analyzing. As you are contemplating every scenario in your mind, someone else is submitting an offer on your dream home! You have probably spent months preparing for this moment, you've done your homework, right? Be confident in your decision! Remember, in a seller's market you want your offer to appeal to the seller. A market like this moves fast, often leaving buyers less power to negotiate with sellers and less time to delay. Wondering what "highest and best" means? "Highest" refers to the offer price. "Best" refers to all the other components of your offer - the amount of your money down, contingencies, your willingness to be flexible with closing and possession date to accommodate the seller's timeline. Now is not the time to be overly picky and ask for too many concessions or contingencies. Make sure the things you ask for are worth it. That $5,000 carpet allowance you were thinking about asking the seller for, it could be the only difference in your offer and someone else's for the same price. Generally, sellers are going to gravitate towards the highest offer from a qualified buyer with the least contingencies. Just as you see value in the home, so does someone else....or in this current market, so do many other people.