Homebuyer beware: it’s a seller’s market in the Lake Region. You’ve got to shop smart or someone else could end up owning your dream home. Throughout 2017 and the first quarter of 2018, single family homes and condominiums in Laconia, Gilford, Meredith and Moultonborough, New Hampshire sold at the fastest median pace in over a decade.
This seller’s market pace is fueled by low inventory. For example, during the first quarter of 2018 Laconia and Gilford had the lowest supply of homes for sale since at least 2007.
So if you’re a homeowner looking to maximize the return on your property investment, it’s a great time to sell because home values are peaking, buyers are more plentiful than home inventory, and there are relatively few competing properties.
But what if you are a prospective home buyer? Here are a few tips to help you be a smart, competitive buyer in a seller’s market:
Get preapproved—If you’re not a cash buyer, you should prioritize getting preapproved for financing before taking any further steps.
Preapproval will help you establish a realistic buying budget that considers all of your housing expenses and ensures you’re shopping in the appropriate price point. Preapproval will also help you determine four very important things: what type of financing you qualify for, how much interest it will cost, how much money you’ll have to put down, and how long it should take to “close” once the seller accepts your offer.
Preapproval is always a good idea for homebuyers planning to finance, but it’s especially important during a seller’s market because attractive homes and good values can sell very quickly and it can be heartbreaking to miss out on the home that you really want because another buyer is preapproved and you’re not.
The bottom line is that sellers take preapproved buyers more seriously. Preapproval sends a signal that you’re serious, prepared and qualified. Meet with a lender, get preapproved and share a copy of your preapproval letter with your agent, who can then add it to your offer submission. If you are a cash buyer, talk to your agent about submitting proof of funds with your offer.
Keep a poker face—It’s super exciting to finally find the home you’ve been searching for. But don’t let the listing agent see your desire and excitement when you find the home of your dreams.
A good Realtor® pays as much attention to people as much as they do to property. The listing agent’s job is to broker the best deal they can for the seller. When the listing agent senses that a prospective buyer loves the home and wants it so bad (maybe because the buyer blurted out something like, “Oh, I just love it and want it so bad!”), it sends a demand signal that can compromise the buyer’s future negotiation position.
A smart buyer keeps a poker face during showings and open houses. Even if your heart is racing, wait until you’re safely out of sight and earshot to do the I-just-found-the-home-of-my-dreams happy dance in front of your Realtor®. Then ask your agent to prepare an offer as quickly as possible, before someone else does.
Use contingencies to act quickly and with confidence—Buying a home is a big decision and, as much as you may want the home, it can be nerve wracking to actually commit. But in a seller’s market buyers are competing with other buyers and so quick action is essential.
Ask your Realtor® about contingency agreements, which are predefined conditions that must be met in order for a home sale to be completed. If agreed contingencies are not satisfied prior to closing the sale can be cancelled and deposited funds will be returned to the buyer.
Contingency agreements give buyers a chance to do two things once an offer is accepted. First, the listing will move from “Active” to “Active Under Contract” in the MLS, giving you some time (14 days is common) to breath, think, process, pray and do the due diligence (for example, have the home professionally inspected) that will help you be confident as a homebuyer. The effect is clearly that of “first right of refusal.” Backup offers may be accepted by the seller, but a signed Purchase and Sale Agreement puts the buyer in control for a time, even in a seller’s market.
The most common residential contingency clauses give buyers the option to withdraw an offer if the property appraises for less than the agreed-upon purchase price, or if the home inspection results are not satisfactory to the buyer for any reason.
On a related note, while buyers should use proper contingencies to protect themselves, it is important to not insist on too many contingencies when submitting an offer during a seller’s market, as this can generate fear in the seller that they are wasting time on an offer that will never close, and possibly missing out on other opportunities as a result.
Write a letter—Finally, you may consider adding a personal note to the seller in your offer package. I’ve seen two recent examples that helped put the buyer’s offer over the top. The first, written by a single mother and aspiring first-time homeowner, focused on her immediate emotional connection to the home, and how she looked forward to having a new generation of family members establish loving memories and milestones in there. The second example, which was written by a male client with a highly technical background, focused more on his admiration for what the current owners had done to improve the home structurally and aesthetically. Sellers can find such personal letters endearing and influential when considering multiple offers.
In a seller’s market you’ve got to shop smart, be prepared and act fast before someone else snaps up your dream home. Smart buyers can take advantage of preapproval, a stoic poker face, contingency agreements and personal letters to be competitive in a seller’s market.
Please feel free to visit www.rocherealty.com to learn more about the Lakes Region and its real estate market.