Smart Buying in a Seller’s Market – Revisited

by Coldwell Banker Evergreen Olympic Realty, Inc. on March 4, 2016

qtx9y3e9uyyx_CB11897_Leubuscher_1-web (1)Our local real estate market is off to a record start.  With 882 pending home sales in January and February, we blew past the previous mark of 763 sales last year.  New buyers are now outpacing new sellers coming to the market.  This is leading to multiple offers on many properties.

Much talk around the country centers on lack of choice for buyers.  The reality is that new listings coming to the market are at a five year high.  So the challenge in this market isn’t so much lack of choice as it is the quick pace of the market.

To lessen the frustration of buyers in this type of market, here are seven tips to help navigate this Seller’s market.

1. Know the market better than the competition. In this market, uncertainty leads to either jumping in too fast on the wrong property or missing out on the right property.  Work with your agent to understand the current market dynamics.  Every area, property type, price range, and even individual home will have a different market dynamic.

 Looking closely at what is moving well – and not moving well – in your desired area and price range will help you make a great choice when a new listing comes on the market.  When you have a greater knowledge of the market, you can make a better and quicker decisions than competing buyers.

Sometimes that means recognizing value and stepping up with the best offer, and other times it means not writing an offer at all.  When you make an offer you want to know it was a great decision made with confidence.

 Working with a full-time agent who knows the market well is the first priority.  Without this your level of success won’t be as great. With so many details involved in buying a home, there is no substitute for having a great agent on your side.

2. Work with great professionals. Working with a full-time agent who knows the market well is the first priority.  Without this your level of success won’t be as great. With so many details involved in buying a home, there is no substitute for having a great agent on your side.

The next most important partner is your lender.  Loans are not a commodity.  TV commercials and internet ads would have you believe this.  That is a mistake.  The process of getting a loan is mostly about the service.  Interest rates for the most part are pretty competitive, but not all lenders are equally capable of navigating the complex and heavy regulations of the mortgage business.  Smart sellers pay attention to competing buyers’ lenders.  An otherwise attractive offer will be passed over in favor of one that has a reputable lender with a track record of getting things done right and on time.  Pick one that meets that criteria.

3. Know your budget – The other benefit of picking the best lender is that this person not only knows your financial capabilities but also your financial comfort. There is an important difference and it is crucial to understand before getting into a hot market. Taking time to sit down and discuss these options with a reputable lender will give you buying confidence.

The competition in markets like this generally leads to higher prices.  The buyers who fully understand their financial capabilities, and limits, will be in the best position to succeed.

Sometimes success is knowing when to walk away.  If bidding becomes too robust, a buyer should consider how comfortable they would be paying the higher price.  Even if a buyer is willing to go higher to “win” the bid, the bank (if the buyer is borrowing money for the purchase) may not lend if the home fails to appraise at the higher value.

To that point, even though a buyer can be contractually protected by a financing contingency (which means the buyer is not obligated to purchase the home if the lender will not loan the money), there is other harm to the buyer.  For instance, a buyer typically spends just under $1,000 on an appraisal and home inspection.  These common and otherwise worthy expenses are for not if the home doesn’t appraise for the purchase price.  Therefore, it is important to consider how high a price is too high for the lender.

By the same token, many buyers can walk away from a competitive situation only to later regret doing so.  Often times it is just a slightly higher price that wins out in a competitive situation.  If the house truly fits most of the buyer’s needs, and there aren’t other good options available, then paying a bit more may be worth it.  That is particularly the case with rising interest rates and home prices.  By waiting for the next home a buyer could end up paying more in the end.  Those opportunity costs should also be considered when faced with a competitive situation.

4. Know what you want – and don’t want.

Be willing to compromise – but only on some things.  In addition to establishing that comfortable budget, buyers should be thorough in determining the must-have features from those that would simply be nice to have. Keep an open mind about improvements that can be made over time. For example, paint is an easy, affordable update. Features such as flooring, cabinets and countertops can be done over time. The right home may just need a little work to make it perfect.

In this low inventory market buyers can become frustrated that the “perfect” home isn’t out there.  The reality in any market is there isn’t such a thing as perfect.  Nearly all buyers look at making some changes to their new home.

At the same time, be aware of things that cannot be changed, or at least are very expensive to change. The location of the home is the biggest driver of price – and it cannot be changed.  Also, if the home does not have the desired floor plan, a buyer should consider how much it would cost to achieve that better layout. The cost of that type of improvement can range from the modest to the prohibitive.

Without great thought going in, compromising on these types of things in a competitive bid process can lead to buyer’s remorse.

5. A lesser known option. Even for buyers who had been willing to take on renovations to make the home just right, the main challenge in the past was paying for the improvements. The outlay of cash upfront can be prohibitive, and separate home improvement loans typically come at a much higher interest rate than the purchase loan.

Today, there is a great loan program for buyers to wrap the cost of improvements into the purchase mortgage loan.  This way, a buyer can get into a home, accomplish desired improvements after closing, make just one lower-interest mortgage payment, and reserve the cash that would otherwise go to pay for the renovations. These “purchase and renovate” loans are a great product to help a buyer achieve the desired plans.

6. Be tuned into the market everyday – the best home may not be on the market yet. Standing inventory of homes available for sale is near an all-time low.  At the same time, our market is at a five-year high for new listings coming on the market.  The message is homes are selling quickly, but there is choice.  It just means that if the right home isn’t there for you today, it may be tomorrow.

Work with your agent to identify new properties. The MLS is the marketplace of homes for sale. Throughout any given day your agent is constantly checking the MLS for new listings that arrive on the market.  Electronic alerts are set so that new homes matching your criteria are immediately sent to your agent.  This happens even before these listings make it to consumer websites like Zillow, Trulia and

But the MLS isn’t always the first place to learn of a home for sale.  Success lies in working together with your agent to canvas the area and keep your ears open for upcoming listings. This way, you may even learn of the property before your agent. Ultimately, identification of a property is a team sport. Wherever the home is found, it is just the starting point.  Getting to closing in a market requires great skill and care too.

7. Know how to make an attractive offer – but one that still protects you. In hot markets some buyers can make short-sighted decisions.  For example, some believe taking on a home “as-is” without an inspection condition will make an offer look more attractive to a seller.  However, purchasing a house is a huge decision.  Buying one without investigating the condition of the home is not wise.

The key is to know that there are ways to structure an offer that is appealing to a seller but still protects the buyer.  Interestingly enough, these contracts usually lead to a win-win for both buyer and seller.  In our experience, that is the only way to purchase or sell with peace of mind.

Success in this market comes with greater knowledge. Working together with your experienced real estate professional and seasoned lender will allow you to successfully find the right home that has a perfect fit.

This is definitely a good time to be a buyer. Prices around the area are on the rise and interest rates are still unbelievably low.  With interest rates rising less house will be available at the same mortgage payment. Now that prices are also on the rise, a buyer can quickly be priced out of something that may have been affordable when prices and interest rates were lower.  This is ultimately why we are seeing a big jump in the number of buyers in the market.

However, with the proper preparation, buyers willing to compromise on some things, while standing firm on those that matter most, will find success and a comfortable outcome in this market.

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