Buying a Home in a Seller’s Market: How to Get the Most for Your Money

A home seller’s market is simply a matter of economics. Inventory is low and demand is high, leading to some homes being on the market for only hours with competitive bidding.

Home prices have been going up for 50 consecutive months across the country, according to data from the National Association of Realtors. The median existing-home price in April was $232,500, up 6.3 percent from April 2015. Housing inventory is 3.6 percent lower than it was a year ago, when it was at 2.22 million homes.

During a buyer's market is when most experts will recommend you buy real estate. A buyer's market is when there are more properties for sale than prospective buyers, and sellers are more willing to go with a low bid.

However, that doesn't mean you can't buy a new home in a seller's market, when there are more buyers than homes, and sellers can afford to hold out for higher offers.

It’s still possible to buy a home in a seller’s market, though it’s obviously more difficult than it is in a buyer’s market or otherwise. Here are a few tips for buying a home in a seller’s market:

1 - Research

Research and choose your Realtor, speak with lenders for an approval letter and maybe even research inspectors as they can sometimes be booked a few weeks out.

2 - Make your best offer first

In a strong seller’s market, or if the seller has received multiple offers, you should be prepared to make your highest and best offer quickly. If there aren't any offers yet, you should still be prepared to make your best offer to prevent competitive interest.

3 - Be ready to bid

If the seller receives multiple offers they may give you the opportunity to make your highest bid. Once all highest and best offers are received the seller will then review all offers and typically respond to the one they want to work with.

4 - Don’t expect a counter

There are no counter offers in a seller’s market.

You really need to put your best offer on the table. Owners are going to see three, five, 12 offers all at once. They don’t need to write a counter, they can pick and choose the very best offer. So buyers need to be amazing with their first offer.

5 - Show cash

Show a seller how serious you are by offering more cash than normal in earnest money — a deposit made to the seller to show a buyer’s good faith in a transaction.

6 - Offer non-price factors

Some sellers will accept your price if you provide some non-price considerations that can speed up the transaction, also called contingencies. In a strong market a buyer needs to consider shortening the financing contingency and the option period. *Always speak with your lender prior to shortening the financing contingency

Sometimes the property might not appraise for the highest offer, and the loan won’t be approved. A lower offer with strong non-price factors may win out. The more contingencies a buyer has in their offer, the greater risk for a seller and the more likely a seller is to reject them in a seller’s market.

One of these is a home inspection contingency. A home inspection is very important for a buyer, but some buyers will waive it to help improve their offer.

Buyers can also help themselves by being flexible with dates and deadlines in a contract. Giving a seller extra time to move out, for example, can make a seller’s offer more appealing.

A few other things to consider leaving out of your offer if you are competing:

• don't ask for closing cost contributions from the seller

• don't ask for up front repairs

• don't ask for too many upfront items like carpet cleaning, or professional home cleaning

• purchase your own home warranty

7 - Have money for a low appraisal

High home prices can lead to home appraisals that don’t climb as fast, leaving lenders to not fund the loan. Gordon, a Colorado real estate agent, recommends that home buyers have money set aside the pay the difference between a contracted purchase price and the appraisal. “Savvy home sellers are looking for purchasers that can make up the difference between the negotiated sales price and the appraisal,” he says.

Buying a home takes more than money; it also takes time, research and financial planning. Since buying a home is probably the biggest purchase you'll ever make, it's always better to be prepared to make an offer.