When it’s time to buy a home the real estate market fluctuates a lot, making it difficult to predict whether the market will favour buyers or sellers. In a sellers’ market, buyers can get what they want if they bring their “A” game and are decisive. In a seller's market, here are some of the most common mistakes we see buyers make and how to avoid them.
Opening With a Low Offer
The desire to get what we want for the least amount of money is deeply ingrained in us. When most people see a home’s listing price, they naturally wonder how much the house is really worth and if they can 'get away' with paying less.
If the house is overpriced in comparison to other similar homes in the area, or if it’s a buyer’s market with plenty of available inventory, which is certainly NOT the case in the Waterloo region, or in Ontario in general right now, offering less than the asking price is a sometimes a reasonable strategy.
However, attempting to negotiate a deal in a seller’s market will rarely be the best strategy. Many would-be homebuyers do not make a strong enough offer in a seller’s market. When there is a scarcity of inventory, and competition is fierce, we always encourage buyers to come in with a strong – but reasonable – opening offer at Team Pinto.
Over-Analyzing a Home Purchase
Over-analyzing a home purchase in a seller’s market is risky, just like buying a home on the spur of the moment. You run the risk of losing the Waterloo Region home you’ve fallen in love with if you wait too long.
Make an offer as soon as you’ve decided on the type of home you want, the location you want, and your price range, and you’ve found a home that meets your requirements.
Prepare to move quickly by having your finances in order — get a mortgage preapproval — to give yourself more leverage. Know how much you can really afford, fix any credit issues, save up for a down payment, and put off other major purchases.
Working with an Inexperienced Agent
In a seller’s market, it’s extremely beneficial for would-be home buyers to get all the help and support they can. You’ll have a better chance of getting the home you want if you work with a seasoned, locally based real estate agent. Furthermore, in most cases, it is the sellers who pay real estate agents, not the buyers.
It’s critical to be “offer-ready” when competing against other buyers in a fast-paced market. Working with a real estate professional can save you a lot of time and stress because they are familiar with the process and can provide valuable insight into upcoming inventory.
Not Getting a Mortgage Preapproval
You may be absolutely sure that you will be approved for a mortgage loan due to your consistent income, low debt-to-income ratio, and high credit score, but the seller is unlikely to be aware of this, and they won't just take your word for it. Preapproval from a lender is the only way to show the seller that you’re a qualified buyer.
This means that getting pre-approval is crucial. If a buyer does not have the cash to purchase without a mortgage and has not spoken with a lender, they have no advantage. If you don’t get this, it sends a message to the seller that you won’t get your ducks in a row and aren’t serious about house hunting.
It’s important to note that we’re discussing preapproval rather than prequalification. Simply put, prequalification means you’ve told your lender about your financial situation. Preapproval entails filling out a mortgage application and providing supporting documentation.
It’s crucial to get preapproval from a reputable lender. Presenting this to the seller demonstrates that the buyer – you – have already started the process and is committed to making the deal a reality.
Not Being Ready for a Bidding War
A bidding war is more likely to break out in a seller’s market than in a buyer’s market. For fear of going over budget, no buyer wants to be involved in such a battle. Set your search budget below your maximum budget to allow for a bidding war if an over-asking situation arises.
Not Learning From Your Mistakes
There’s no shame in having an offer rejected, but it’s easy to become frustrated if your offers are repeatedly rejected.
So that you can move into your dream home, make sure you learn from your previous transaction(s). You might have to let a few keepers slip through your fingers, go through a few sleepless nights over it, and then return with a vengeance to seize the next best opportunity in front of you.
