Sellers Markets and Bidding Wars
Posted By: Lindsay Faircloth
In: Buyer Info
Date: Tue, Mar 29th 2022 10:33 am
"It's a Seller's market", "highest and best", "multiple offers", these are the phrases that are repeated over and over right now. Buyers are just expected to accept the fact that the home they see may not be within reach for them. They are expected to understand and accept that the price they see listed is most likely not what that property will sell for, and Buyers are being encouraged to pay more for a home than what it appraises for because there is someone else who will buy it if they don't. In some cases, contingencies are being removed; contracts won't be accepted if they have any protection in place for the buyer such as home inspections, appraisals, even financing in some cases. How is there nothing wrong with this?
In looking at the current state of the real estate market, how is a buyer supposed to be able to maneuver through the mess, find the home they need, and be protected at the same time? Seems impossible but it's not. Some sellers have gotten greedy but it's not always of their own doing. Some of them are being advised to grossly overprice their home because there is no inventory and some of them are making a lot of money off of their property. There is nothing wrong with making money when a market is backing your decision. I do see one issue that gives me pause though. What happens to the person who purchased that home in a few years when the market settles? Where is the equity in their investment? It's in the pocket of the sellers and it will stay there for quite a few years in most cases.
I could go on at length with my opinion on this market and all of the issues I have with it. However, this blog is for buyers in this market and how to prepare them for their purchase. Let's get into it.
- HAVE YOUR PREAPPROVAL: This is the most important tool that you have. Knowing what you can afford, what your payment will be, and having the confidence that you can purchase is key to negotiating and purchasing a home. You need to know the terms of your financing in order to submit an offer on a property. If you are paying cash, be sure that you have proof of funds that can be presented with an offer.
- HIRE A GOOD REALTOR: This market is a feeding frenzy. You need to have an advocate who will go to bat for you and represent your interests. You also need a professional who will provide you with all of the information that you need on that property in order to make a well-informed decision. This needs to be done quickly and should be done before you even see a property. You want to go in knowing everything you can ahead of time. Having a Buyer's Agent will help you become educated on each property you see and protect your interests. To learn more about agency relationships in South Carolina and review the South Carolina Disclosure of Agency Relationships visit my Client vs Customer page.
- ASK QUESTIONS: This is not a time to be shy. Purchasing a home for most people is the largest investment and purchase they will make in their lifetime. There are no dumb questions, especially when it comes to buying a home. Make lists of things that come to mind and ask your agent every question that you have. Get a copy of the property disclosures for review. Ask for a copy of the covenants and restrictions if there is an HOA. Be sure that you know how much the HOA is each month and what is included. Ask what the current market value really is on the property. You want to go into an offer situation knowing that you have covered everything on your end that you can so you feel good about the decision you are making.
- BE REALISTIC: This is where a lot of buyers get tripped up. Bumping up your price a few thousand dollars in most cases is not unrealistic. However, going over what you can realistically afford and getting caught up in the emotional aspects of bidding wars can lead to disaster. If you don't HAVE to purchase a home right now, wait. I know that sounds odd coming from the mouth of a Realtor when it is my job to sell houses. However, my job is not just to sell homes. It is to be an advocate for people and represent my clients in all aspects. Protecting the interests of my clients includes being honest about the market and setting the appropriate expectations. Buying a home in this market can be done and it doesn't have to be soul crushing. Set your expectations, be realistic about your choices and the market, and don't be afraid to walk away from a house that doesn't meet your needs financially.
- BE PATIENT: At risk of sounding cringy here I will use that old adage, "Good things come to those who wait". Even though it is hard to believe, this is true in this market too. It may take some time to find the right home. It is most likely going to take some rejection, a good level of frustration, and maybe some heartbreak. After nearly 20 years of doing this though, I can tell you with certainty that the home you need can be found. Don't settle for grossly overpaying on a home that you barely like just because it is the only option you have. if you can afford to wait, just be patient.
One last thought before I go, this one is for all of those sellers out there thinking of selling your home. Before you jump into the listing pool, take a look at what is available to you to purchase. Are you going to find a home that is better than your current home at a price that is what you want to pay? Remember that in most cases you are becoming a buyer when you list your home. Take a moment to reflect on that when you are negotiating with buyers and treat them how you would like to be treated. Things always come full circle.