How To Buy A House In A Seller's Market
If you follow Real Estate at all, you know how crazy the market is! You're probably seeing ads every day talking about how much over asking price every house has been selling for. It has dawned on me recently that nobody cares. In fact, I think that the Real Estate Community has been scaring potential Sellers with all of these statistics...
Let's back up for a second and understand how Realtors make a living. Although we all love Buyers, we really make our living off of listings. In order to appeal to potential Sellers, we've been talking a lot about all of these recent stats. We've been trying to persuade them to sell, by telling them that they're house has gone up by thousands of dollars, and now is the time to SELL!
The problem is, that Realtors, myself included have done a poor job of articulating our plan to help them buy their next house. Sure, their house is worth a fortune, but where the heck are they going to move?!
The reality is that there is no simple answer. There isn't some secret trick to help people win every bidding war, but there ARE some tips and tricks that people can use to help dramatically improve their chances.
Here are 5 tips to help Sellers find their next place to live...
1. Prepare Yourself
What I have found over the years is that people are generally OK with tough situations. What they hate are surprises! Make sure that you're prepared mentally for an uphill battle. Understand that you very well may miss out on the first house you put an offer in on. It's ok - there are more houses!
Also, prepare yourself with your mortgage agent. Make sure you have ALL of your financial documents sent to them before you start looking. Nobody likes a last minute mortgage crisis!
2. Try The "Long Close"
When you sell your house, you have ALL of the leverage in the negotiations. Buyers are willing to submit to almost anything you request; take advantage of this. Instead of a standard 30-60 day close, ask for 120 days. This tactic will give you plenty of time to not only find a house but put in a strong offer that isn't contingent on you selling your home.
3. Move To A Different Area
You don't have to change cities but try changing areas. Within every city, there are neighbourhoods that all increase in price at different rates. Try to find an area of your city that hasn't gone up by the same percentage. Don't worry - this doesn't mean you need to move to a slummy area. In a market like this one, the less desirable areas often increase in price by the highest percentages. Try to leverage your high sale price to help you move to a slower moving, more established part of town!
4. Know Your Mortgage Math
I've drawn out a hypothetical scenario below. The point is, most people don't usually realize the MASSIVE difference in their down payment from their first house to their second. That added down payment can make a huge difference in your purchasing power... (these numbers are all approximate)
5. Buy First?
So, you own a house and it's skyrocketed in value? You're pretty cozy, right? Talk to your Realtor and get an estimate of how quickly you could sell and for much much. From there, start slowly looking at houses. Make sure you're ready to pounce on one that fits what you're looking for, but the best way to make sure you don't end up homeless is to buy your next house before you sell yours!
If all of the previous tips just aren't cutting it, here's one that will help both you AND your Realtor. Give your agent permission to run and ad, and canvas your dream neighbourhood with the message of...
"I have a buyer named John that would LOVE to live in this neighbourhood. His price range is between $X and $XX and he needs at least X number of bedrooms and X number of bathrooms"
Your agent may get some new listings, and you may just find your dream house with no competing offers!
The Real Estate Market has changed, and it's critical that we change with it to make sure that people are still able to accomplish whatever their goals may be. What I've learned is that people don't care about selling tips. So here is my notice; until the market changes I'm done with selling tips and crazy sales stats.. NOBODY CARES!