If you live in a city in North America, chances are you live in a seller’s market. Oftentimes when homebuyers hear the words ‘seller’s market’ their palms start to sweat, and they start making plans to move back in with their parents. It’s easy to feel disheartened when dealing with a seller’s market, but it’s far from impossible to get the house you want in any market, whether it’s a home for sale in Vancouver or a condo in Toronto. Here are 6 tips to help you navigate a seller’s market.
Get Your Bearings
Before anything, you need to know what a seller’s market actually is and how it differs from a buyer’s market. The short and simple answer is a seller’s market is any real estate market where there are more buyers than sellers, giving the sellers leverage over the buyers. It’s a supply and demand thing. You can usually tell a seller’s market by measuring its market absorption rate, basically a measurement that tells you how many months it would take to sell all the available homes for sale in any given area. Any amount below three months is usually considered a seller’s market.
Take a look at your local market and work with your agent to determine whether you’re in a buyer’s market or a seller’s and how extreme the market leans in either direction,
Find a Real Estate Agent with Local Knowledge
In big markets like Toronto Real Estate, most agents focus either on one type of real estate (luxury) or specific neighbourhoods throughout the city. When it comes to buying in a seller’s market, precision is key. Find an agent with an intimate, up-to-date knowledge of the specific areas you’re interested in living in. An agent that knows the area will be able to get your bid in as soon as possible if they already know what to expect in terms of bids and houses about to go on the market.
Make Your First Bid Count
In a hot market, it’s not just the home seller you have to worry about, it’s all the other buyers too. Usually, in a seller’s market, most houses receive a handful of bids, not just yours, and in really hot markets they can receive twelve or more. There won’t be any time for negotiation or counter offers in the bidding process, the seller will just look at the available first bids, pick the one they like most, and move on from there.
So make your first bid on a house your best bid. So how do you make the best bid in a seller’s market?
Give Yourself Headroom.
In a seller’s market it’s not unusual to pay significantly more than the asking price on any one property, purely to outbid other buyers. If you’re looking to outbid others, look at homes priced below what you can actually afford. That way, the asking price will still be twenty or thirty thousand dollars less than what you’re going to actually bid. You’re not crossing the line of how much you’re willing to spend, but you are probably outbidding at least a few of the other potential buyers. But bidding isn’t always about throwing money at the seller, it’s a bit more complicated than that.
Ditch Your Contingencies
To some buyers, contingencies are safety nets to keep them from making a misstep during home buying. To other buyers, usually, those with more equity and experience buying homes (thus with different safety nets of their own) contingencies are like training wheels that just get in the way. Contingencies make sellers uncomfortable because they rely more on the buyer and it give the buyers more chances to back out of a deal. If you want to make the seller of the home you’re interested in more comfortable and therefore more likely to sell to you, you can ditch your contingencies and make your offer that much simpler and less risky for them (but riskier for you).
Cast a Wide Net
In a slow buyer’s market, you can take your time and narrow in on one home you’re interested in. That isn’t the case in a seller’s market, where houses come and go in a little under two weeks. The more offers you make in a seller’s market, the better because you’ll probably get outbid most of the time.
If at all possible, bid on multiple homes in the same neighbourhood or multiple homes in the same general area of a city. Better yet, bid on multiple homes in different neighbourhoods altogether, with the caveat that you might have a hard time finding an agent who has intimate knowledge of all the places you’re interested in.
The biggest problem with casting a wide net is you won’t be able to tour all the homes you’re interested in buying. Fortunately, there are sellers nowadays who offer 3D tours of their homes or even Zoom tours for anyone who doesn’t have time to drive out of their way or from out of town to check out the home.
In conclusion, to succeed in a seller’s market, you have to make your bid competitive, either by outbidding or stripping it of terms and conditions that might make the seller think twice. Once you get past the bidding stage, you’ll have more wiggle room and time to breathe. It’s all about getting past the other buyers.
