April 21, 2021
How to Buy a Home During a Hot Housing Market
More than a year into the uncertainties of the pandemic, the 2021 real estate market is shaping up to be extremely fast-moving. Spring is always a busy time of year in real estate, but the local market this year has been even busier than normal. As a buyer, navigating the real estate landscape in a time like this can seem daunting, but never fear—that’s what we’re here for! If you’re planning to buy in the coming months (or in the next year), here’s what you need to do to prepare and to set yourself up for success.
What is a seller’s market, and why are we in one now?
Before we dive in, why is the market so hot in the first place? Currently, we’re in a seller’s market, which is when demand exceeds supply. In the case of real estate, that means there are more buyers looking for homes than there are homes available for sale. In a seller’s market, there is more competition between buyers, and homes tend to sell faster, giving sellers the advantage.
But why are we in a seller’s market now? The spring real estate market usually begins in February, a few weeks before spring weather itself makes an appearance. Earlier this year, as the spring market was just beginning to ramp up, inventory was slimmer than normal, meaning not as many folks are listing their homes for sale this spring compared to previous years. Inventory has recovered somewhat since then, though our agents agree there are still a few less homes on the market than usual for this time of year.
Does this mean I shouldn’t buy a home right now?
Short answer: no. While this type of market requires more preparation up front, it is still possible to find your dream home. Especially with the help of a good agent, this market is nothing to shy away from. If you want—and especially if you need—to buy a home this spring, here’s what to expect, and how to prepare yourself for the buying process.
Step 1: Get your financing in order.
While financing is usually the first (and most important) step when getting ready to buy a home, it’s even more crucial during a hot housing market. In a typical market, many agents recommend getting preapproved for a mortgage, but the general “okay” from your lender was good enough to start house-hunting, even before you had the final preapproval letter in hand.
Now, however, that preapproval letter is a must. Sellers don’t want to accept an offer only for the financing to fall through, wasting precious time and potentially losing out on other offers. Having a physical copy of your pre-approval letter in hand shows the seller that you are serious about the home and able to follow through.
However, it’s not just the preapproval that matters. It’s also important to figure out ahead of time how much you are able and willing to put down as a down payment. Generally, the more you can put down—for example, 10% instead of 3% or 5%—the better your odds of your offer being accepted, simply because the seller will know you are in a better situation to buy the house. However, don’t commit to a down payment outside your means to secure a home, as you risk putting yourself in financial trouble down the road.
While 100% financing—which requires no down payment— is still available for select buyers, many sellers are cautious to accept such an offer, as it typically means that there is no additional funding available.
Step 2: Find an agent you trust.
Again, this is important no matter when you plan to buy a home, but it’s all the more important at a time like this. Your agent is your expert guide. Their connections and negotiation skills can make all the difference in your home search. And, even better, it’s at no cost to you! Sellers pay the agent’s commission, so as a buyer, working with an agent is free.
Response time is especially key in a hot market. As you shop around for an agent, pay attention to how long it takes them to get back to you and answer your questions. While this is a busy time of year for agents, too, an agent who takes days to get back to you about a showing could cause you to miss out on a home. On the flip side, be timely in your responses to your agent as well; they can’t work their magic if you don’t get back to them! Long story short, open lines of communication between you and your agent are crucial.
Step 3: Start looking early and often.
With many buyers and fewer homes for sale comes competing offers—and potentially being on the losing end of a competing offer. Starting your home search a few months before you need to be in the new home gives you the freedom to be able to be a little more picky. That way, you have time to create a Plan B (or C or D) if your offer isn’t accepted. It can also help you avoid rushing into a home purchase that is not ideal or, even worse, financially harmful. The last thing you want to do is get caught up in the frenzy!
And remember, it won’t always be like this. The more buyers that purchase a home now means less competition for you in the future as the listings keep coming onto the market. The sooner you start looking, the more time you allow for your more desperate competition to pass you by.
Also, be prepared to go to many showings before you find the home that’s right for you. With lower inventory, there’s often the temptation to see every home that comes on the market in your price range, “just in case.” This may mean seeing more potential homes before you find “the one.”
Step 4: Be realistic and willing to compromise.
Even when searching for your dream home, it’s important to be realistic about your goals and your timeline and to communicate that with your agent. For example, if you’re moving from renting to owning and need to be in a new home within the next month because your lease is expiring, you need to let your agent know ASAP. A restricted timeline may mean less ability to be choosy.
Also, know what you’re willing to compromise on and what features you absolutely can’t give up. Every buyer should have their list of wants and needs, but it’s crucial to know the difference between the two in a seller’s market. For example, are you willing to endure a bit longer of a commute if it means being closer to schools for your children? This can help you and your agent avoid looking at homes that are outside your criteria so you can focus your time and effort where it matters most.
Step 5: Be thorough on your walkthroughs.
When you find a home you’re seriously interested in, be sure you and your agent have done a thorough walkthrough before you put in your offer. Once your offer is accepted, it’s time for inspections, and with many homes receiving multiple offers, sellers are less willing to negotiate for potential repairs that the inspection may turn up. Doing a good top-to-bottom sweep with your agent during showings can help prevent unexpected surprises after the offer is accepted.
Being realistic comes in handy here, too—work with your agent to determine what repairs are worth negotiating for and what “asks” may cause you to lose the offer.
Step 6: Be prepared to fight for a house you want.
In a fast-moving market, the odds of you going up against another buyer when you place an offer are high. Not every home is worth entering a bidding war over, but when you find “the one,” be prepared to fight for it, and know how far you are willing to go. For example, are you willing to pay more than list price? Are you willing to adjust the closing date to be more desirable to the seller? Your agent can help you work through these considerations (and should help you steer clear of buyer’s remorse to the best of their ability). The end goal? To help you make the best offer possible to secure the home of your dreams.
Step 7: Stay calm and be mentally prepared.
In all actuality, this “step” is more of a mindset you should adopt throughout the entire process. Buying a home is usually never considered a walk in the park, but a good agent can take the load off of your shoulders, especially in a busy market like this one. Having realistic expectations is the key to preventing frustration or disappointment.
It’s equally important to keep a calm, level head. Getting swept up in the frenzy can lead to hasty decisions and buyer’s remorse—such as overpaying for a home or committing to a home you’re unsure about. Buying a home is a big decision, both personally and financially, and it’s not one that is meant to be rushed.
Is now a good time to sell my home?
The short answer: yes. The long answer: make sure you know what you’re getting into first. While the market is hot and geared toward sellers, remember that once you do sell, you become the buyer. If you do want to take advantage of the market and list your home, be prepared for your home to sell quickly, and be sure you have a plan for where you’ll go if that happens.
A good agent, realistic expectations, and a “stay calm” mentality are the perfect recipe for a successful home buying experience in this fast-moving market.