First Published in Philadelphia Real Estate Mag.
How you make an offer in certain market conditions is crucial to a successful home purchase. With all the inevitable stress that comes with purchasing and selling a home, the last thing both parties need is bitter loose ends.
Check out some general tips and recommendations on how to approach your offers in both a buyer’s and seller’s market from Anne Koons, a realtor who recently featured on House Hunters, and John Wylie from Compass.
Remember, it’s vital that you work with your agent and consider their advice. Their experience and knowledge base will be your greatest asset in confusing offer situations.
Buyer’s Market and Seller’s Market
Buyer’s and seller’s markets offer very differing circumstances. For example, homebuyers must consider how they will make an offer in the current selling atmosphere.
A ‘buyer’s market’ is a real estate environment in which there is more supply than demand; simply put, there is an excess of houses available, implying that buyers likely have higher bargaining power. In other words, there are too many houses and too few buyers. Home prices tend to drop in order for sellers to attract more buyers. On the seller’s side, it is unquestionably more competitive.
A ‘seller’s market’ is the opposite, in which demand outweighs supply. In this environment, sellers are likely to receive multiple offers on their property, giving buyers minimal to no bargaining power. In fact, it is not uncommon for buyers to have to offer well above the asking price in a seller’s market.
What Market are We in Now?
Although the U.S is in a seller’s market (generally speaking), Wylie confirms, ”Seller’s market for sure. Things are still settling/normalizing [from the pandemic] but the seller’s market. Last summer, there were hundreds of buyers; this past summer, things [inventory] sat a bit longer. I think this fall is a great opportunity for buyers, being that we saw the first normal summer. Active listings are up 1 percent.” Anne Koon, a realtor with over 36 years of experience, confirms that although the U.S is in a seller’s market, it could be changing. She states, “I think it’s changing. The seller’s market may not be as strong right now but will have heavy ammunition due to a small inventory.”
This is the ideal time to purchase a home – but you still want to make sure your purchase is successful without overpaying for the property.
- Take a breath, take your time. If you miss out on a property, something similar will most likely become available. Koons strongly urges buyers not to fall in love with the house. “You’ll find another one. Make sure to leave your emotions out of it. Treat it like a business transaction,” she states.
- Be a step ahead of the game. Koons says, “Get pre-approved before bidding so you’re further along than others. If you’re cash buying, have proof of funds.” Although, she strongly advises first-time buyers to obtain a mortgage, “especially now that mortgage rates are low. First-time buyers should buy now. You can always trade up in 5 years.”
- Review comparable sales and listings. Knowing the competing stock will help you have a better gauge of your target property’s value.
- Consider how long a property has been on the market. More days on the market means buyers are likely getting anxious for an offer – even a low one – so you have more bargaining power.
- Submit a lower offer than asking but try not to insult. If you submit an offer that is too low, sellers may feel like you’re taking advantage of them or do not see the value in their property. Some sellers won’t even respond to these offers, which can negatively affect the negotiation process.
- Do not skip over an appraisal or inspection. One will never know what repairs or issues may result in a steeper bill in the long run. When speaking with Koons, she strongly urges buyers to have an inspection done.
- According to Wylie, it is critical to “know the location you are interested in and be open to expanding that location.”
These markets present more challenges for buyers as there are fewer properties available. Sellers need to act decisively. Being that this is still the market that we are currently in, buyers, please take heed!
- Time is not on your side – act quickly. When a house comes on the market, schedule a viewing as soon as possible so you can make an offer before the competition.
- Have your pre-approval on hand and up-to-date if you are unable to make a cash offer.
- Make a strong offer. This is not the time to low-ball or get a discount. Put your best foot forward, especially if you know that interest in the property is high.
- Offer to pay closing costs.This ultimately increases the seller’s net gain in the sale to further improve the attractiveness of your offer.
- Close on the property quickly. Unless the seller has disclosed their desired closing time frame, they likely want to sell the property as soon as possible.
- Remain focused! Rank your must-haves, so you’ll be more receptive to other things.
IE: Consider the number of bedrooms you will require and whether you will need a backyard and a fireplace.
Lastly, it is important to work closely with a professional in both a buyer and seller’s market. Be educated about the market conditions and consult with your agent to secure a property at the right price. Wylie urges, “Find a solid agent and vet them to! Ask them how many houses they’ve sold and their experience.”