The national inventory of homes for sale has been stuck at low levels for months. In January, for instance, inventory was down 7.1% year over year. That means that a buyer’s choices are somewhat limited and the price a buyer will pay is going to be higher. A classic seller’s market.
While there are a number of reasons for low home inventories, two stand out: more homes and condos were converted to rental units following the housing crisis, and older homeowners are not selling their homes, preferring instead to “age in place.”
A third factor, at least for first-time buyers, is that lower priced, so-called entry-level homes are even scarcer than existing or more expensive homes.
If you are looking to buy a home in a seller’s market, it is still possible to get the home you want but it requires extra effort and, perhaps, extra cash. Trulia has pointed out six common mistakes buyers need to avoid in hot real estate markets. Avoiding these mistakes boils down to being prepared for what could happen and being decisive quickly when the unexpected happens.
Make Your Best Offer
It’s natural to look at a list price for anything and wonder if you can haggle a bit and save some money. In a hot housing market that strategy is not going to work. When inventory is short and competition is fierce, make a strong offer right off the bat.
In a hot market you need to avoid overanalyzing your situation. Decide early the kind of house you want, where you want and your price range. Get preapproved for a mortgage, and when you find a house that meets your qualifications, don’t hesitate, make an offer.
Use an Experienced Real Estate Agent
There’s no substitute for experience, especially in a hot real-estate market. Find a pro, listen to what he or she has to say and be ready to move quickly. Remember, an agent is paid by the seller, not the buyer, so this is free advice and buyers should take advantage of it.
Get Prequalified or Preapproved for a Loan
Getting prequalified means that you have told your real estate agent your financial means; getting preapproved means you’ve filed all the required documentation to a lender and that the lender has agreed to lend you the money. Prequalification is essentially mandatory, but preapproval makes your application much stronger.
Be Prepared for a Bidding War
Leave some room for boosting your bid if that becomes necessary. In a seller’s market, a bidding war is not only possible, but likely. Be prepared.
Be Prepared to Lose
Put another way, even if you lose the bidding, you’ve learned something. Put that lesson to work for you as you continue your search. No one ever said this was going to be easy.