A lot can be said about how real estate markets impact purchasing and selling of property. If you’re not familiar at all with it, a seller’s market is when demand exceeds supply. This means that there are more buyers out there than there are houses to buy.
This creates an obvious conflict in itself. The number one rule of real estate is to never buy in a seller’s market. But why is that? If you’re interested in finding it out, this is the place to be. In this article, we will look at why you shouldn’t buy when the supply is low. So with all that said, let’s start.
There Aren’t Enough Houses
Supply and demand greatly impact the real estate market. When supply is low, that means there aren’t too many houses to buy. But when supply is low, demand is usually much higher. It’s quite common for real estate properties to be on the market for only a few hours before someone snatches them. This means you have to be pretty fast if you want to purchase a property in a seller’s market.
With not enough houses to go around, people can get quite competitive. And if you want to go house shopping in a seller’s market, then you will need to be pretty competitive yourself.
You Will Pay More
Another reason why you should never go house shopping in a seller’s market is that you will pay much more. Whenever more people compete for a single property, it creates competition that ultimately increases the price of the property. Sellers can just sit and wait until someone offers the highest possible offer for a property.
This creates an obvious problem. The biggest mistake in real estate is going over your budget. If your budget is X, going above it can put you in a quite serious financial strain. But whenever going house shopping in a seller’s market, you have to be prepared for the worst possible outcome. Getting into a bidding war with potential other house buyers will require you to be fast and go above your budget. But if you’re not prepared to do that, then it’s best to wait until the market shifts.
You Might Have To Reconsider Your Objectives
Even if you’re buying in a seller’s market, people still need homes to live in. If you’re planning on starting a family and need to move out of your parent’s house, then it’s absolutely essential to buy a house to move into. But considering the huge prices for homes due to competition, are you willing to give in to the market?
When in a seller’s market, we have to risk something to get the property we want. This might mean sacrificing more money or it could mean moving someplace elsewhere. If the city or state you plan on buying property is in a seller’s market, then you might have to reconsider your objectives and look for property elsewhere. If that’s not possible, then you’re going to have to wait out the storm or pay extra.
You Have To Be Fast
You have a golden opportunity to buy a property in a seller’s market. What do you do? Do you waste time negotiating, or do you seize the opportunity? Being fast is the only way to capitalize when real estate inventory is low. But not a lot of people can do it. For starters, you have to have your real estate agent on stand-by ready to make the offer. If the seller accepts, you have to put a down payment and ready the paperwork so that you don’t miss the opportunity.
But what happens if the seller gets a better offer? Are you 100% certain they’ll respect the agreement you have? If you haven’t put a down payment, then you might as well send a much bigger offer. Whenever going house shopping in a seller’s market, it can be very stressful. You and your agent will have to be extremely fast not to miss out on a golden opportunity.
What Not To Do When House Shopping In A Seller’s Market
Before we end this article, let us give you a quick rundown of a few things you should never do when buying in a seller’s market.
Remembering the point we made previously, you have to be extremely fast to submit an offer. Homes can disappear in a matter of days if not hours when supply is low. So the last thing you want to do is stall on the offer.
Maybe you’ve found the perfect house but it’s just above your budget. The biggest mistake you can make is to get your offer immediately thrown out by submitting an offer below the asking price. Lowballing in a seller’s market will do nothing but get you ignored. If you’re seriously thinking of buying a property when real estate inventory is low, then make your highest and best possible offer.
- Not Getting Pre-Approved For A Loan
And the last thing you do not want to do when going house shopping in a seller’s market is finding a property but not getting pre-approved. This is an obvious mistake to avoid making as getting pre-approved is the first thing you do when needing to buy property. By doing that, you will know exactly how much money you have to work with and you also tell the seller that you’re a serious candidate.