8 tips for buying in a tight market
It’s always hard to predict how long it will take to find a home to buy. Given the current low-inventory environment, it may take you longer than it would in a balanced market that has enough homes for sale to satisfy the current buyer demand.
Patience needs to be a key component of your home search mentality. Even if a home you like a lot comes along quickly in your search, other buyers may have the same idea. You could end up in competition. If you aren’t the winning bidder, don’t let disappointment immobilize you.
To prepare yourself to buy in this market, plan to look at every new listing that comes close to satisfying your wish list. Accept that you won’t find everything on your wish list. Successful buyers make sacrifices. Just make sure to make intelligent compromises.
For example, don’t get so overwhelmed by the urge to buy now that you overlook that a home you like won’t work for you for long. Buying and selling is expensive; you don’t want to do it often. Make sure that a home you buy will suit your needs for years to come.
There are benefits to seeing a new listing that’s a possibility for you in person rather than looking at it only online or having your agent describe it to you. In a low-inventory market, it’s vitally important to become an expert on local pricing. Follow up with your agent on every listing you liked and find out how much it sold for and how many offers were made.
This way you will know when a listing is underpriced, priced close to market value, or overpriced for the neighborhood. The lower-priced properties tend to attract more buyers. If you’ve educated yourself about local market pricing, you can distinguish between a listing that is underpriced and one that is fairly priced.
HOUSE HUNTING TIP: You can save yourself a lot of time and disappointment if you don’t make offers on underpriced listings that attract five or more offers, particularly if you can’t go much higher than the list price. In one instance, a Piedmont, Calif., buyer was recently enthralled with a listing priced at $895,000. When 10 offers came in, she decided not to jump into the fray because she couldn’t pay more than $1 million. The listing sold for $1.4 million.
Some real estate agents encourage their buyers to make an offer even if they haven’t a chance because they feel it gives buyers a chance to get their feet wet. The problem with this approach is that after slogging through the mud and losing out four or five times, you may feel burned out and drop out of the house hunting search altogether.
Make sure your real estate agent is in touch with the listing agent of a listing you covet so that you have a sense of how much competition there might be. Then based on your pricing expertise, your financial capabilities and how close the house matches what you want, you can make an educated decision about whether to make an offer.
Find out how much work a listing will need. Ask for a disclosure package of seller disclosures and reports, if they are available. Factor this information into the affordability equation. A listing priced at $700,000 that requires $200,000 of repairs isn’t affordable if you can pay only $750,000 at the most.
Have your agent watch for listings that aren’t well-marketed. Out-of-area agents often don’t know how local agents generate activity on their listings. The strategy used on the Piedmont house above was to price low and have more than one open house before hearing offers.
THE CLOSING: An undermarketed listing can be a buying opportunity in today’s market.