When it comes to buying a home, it can be an overwhelming process for anyone. Whether you’re searching for your first home or downsizing for retirement, house-hunting in a hot market is stressful. While you may be thinking it’s best to wait until the market cools, there are some advantages to buying in a competitive market. In this blog, we will take a look at the different types of real estate markets as well as home buying tips in a hot housing market.
Buyer’s Market vs. Seller’s Market
There are two main types of housing markets: buyers and sellers. While the housing market can fluctuate depending on seasonality, the main differentiation with the type of market depends on the current supply and demand.
A buyer’s market occurs when there is more supply than demand. This means that there are plenty of houses on the market but there are no interested buyers. In a buyer’s market, the home prices decrease and stay on the market longer which allows buyers to have leverage over sellers. In many cases, sellers will drop their prices to stand out to buyers and will negotiate in order to prevent losing a sale.
However, in a seller’s market, the demand exceeds supply. This means that there are many interested buyers, but the existing inventory is low, which allows sellers to have the advantage. In a seller’s market, homes tend to sell faster since buyers are competing with one another in order to purchase. Due to the low supply and increased demand, sellers can take advantage and increase their prices due to the increased interest in their home.
Home Buying Tips
Before you jump into the market head-first, it’s important to understand the necessary items you need to purchase.
- Clarify your Must-haves
- Not every home will check off all of these boxes, but before you begin your search you should take note of what your house needs to have. After taking note of your necessary requirements, you should rank them from most important to least. When it comes to your search, It is important to understand that you will most likely have to compromise on some items. When it comes to home buying In a hot market, the longer the list of your demands, the longer it will take to find your home.
- Get Your Finances in Check
- Before your search can even begin, you will need to make sure that all of your finances are in order. Some of these tasks will take time, so do not wait until the last minute to check them off. When buying a new home you need:
- Money for a down payment. It is recommended to save at least 20%. If you do not have 20% of the home’s purchase price set aside, you will need a private mortgage insurance policy.
- Pre-Approval for a Mortgage. A pre-approval will dictate how much money you’re allowed to borrow, how much you should spend, and your estimated monthly payment. This process is crucial in ensuring that you’re making a smart financial investment.
- Even more money for closing costs, appraisals, home inspections, and more.
- Work with an Experienced Realtor
- We recommend working with a local, experienced realtor so that you’re not alone in the process. Realtors stay on top of new listings and can get in contact with sellers to set up a virtual or in-person tour of the property. Having someone on your team who understands the area can give you an advantage in the home buying process.
- Always be on the Lookout
- While your realtor will be sending you the latest listings, you should also look for houses as well. Whether it’s online or through word of mouth of friends, family, or coworkers, being on the lookout may allow you to get your hands on a property before others.
- Act Fast
- When the demand exceeds the supply, it will be crucial to act fast if you find your dream home. If you take your time to think, compare and contrast properties, you may find that it has already been sold by the time you want to put an offer in. By acting fast and having all of your finances in order, you will be able to put an offer down as soon as you know you’re serious.
- Understand Contingencies
- In a hot housing market, sellers have the advantage and will most likely pick buyers with less contingencies written into their contracts. When purchasing a home in a hot market, you should make note of what is most important to you and understand that if you have certain stipulations that the seller may choose another buyer over you. However, having contingencies in place can also save you some trouble in the long run.
- Put in a Strong Offer
- When you find your desired home, your realtor will most likely encourage you to put in a strong offer at or close to asking price. Your offer could include an earnest money deposit, your desired contingencies, and even a personal letter to appeal to the seller.
- Be Ready for Bidding Wars
- In a hot real estate market, you’ll likely end up in a situation where a home has multiple offers on the table. This is where the bidding wars come into play. While you may feel the need to bid higher, be sure to stick to your budget so that you don’t end up outside of your comfort zone.
Patience is Key in a Hot Market
When it comes to purchasing a home in a hot market, we hope these home buying tips will come in handy. While the process can be stressful, overwhelming, and even frustrating at times, we encourage you to be patient and stay persistent in the process. If you’re looking to start your home buying journey, but aren’t sure where to start. Reach out to the team at Metropolitan Title today, we are here to help.