How to Buy a Home in a Seller's Market

What is a seller’s market?  A seller’s market is one in which there are more buyers wishing to purchase than homes available for sale.  An indicator of a seller’s market is when less than three months of inventory is available for sale.  Three to six months of inventory is considered a neutral market, and more than six months of inventory is a buyer’s market.

During a shortage of inventory, homes that are well priced or in a highly desirable neighborhood often receive more than one purchase offer.  In San Mateo County there was less than one month of inventory available for sale in December, 2013.  Given current inventory levels, the potential for multiple offers is expected to continue into the beginning of 2014.

How should a buyer strengthen their offer when there are potential multiple offers?

While purchase price is extremely important in the offer, a well prepared and presented offer can sometimes edge out the highest monetary offer.  Aside from purchase price, what should a buyer include with their offer for serious consideration by the seller?

Build rapport before you submit an offer

The impression you make on a seller often begins well before you even decide to submit an offer on their home.  How much notice do you give a seller before requesting an appointment to see their home?  Is your agent careful to lock all the doors and secure the home at the conclusion of your visit?  Are you careful where you park when you arrive to view the home so you do not inconvenience the neighbors?  At this stage the sellers may not yet know your name, but you are making an impression with your visit to their home.

Do your homework

Carefully review all disclosures and reports provided by the seller.  Thoroughly investigate financing options available to you.  Understanding the appraisal process and its impact on the amount of money you can borrow is extremely important in an escalating market. Make certain your agent is communicating with the listing agent so you are informed of any contract terms that are important to the seller and consider incorporating these terms into your offer.

Prepare an offer that can be accepted as written

Do not assume you will be issued a counter offer if there are multiple offers for a property.  In addition to your best monetary offer, be sure your offer includes the normal contract customs of the area.  The contract and accompanying disclosures should be properly signed, and all documents that support the offer (such as lender’s pre-approval letter and proof of funds documentation) need to be submitted with the offer.

Add Your Personal Touch

Now that you have the seller’s attention with a thoughtfully prepared offer, they will want to know more about you.  This is your opportunity to provide personal information and to convey your commitment to purchase their home.  Sellers want to like the buyer of their home, so this is your opportunity to promote yourself.

You’d be surprised to see the number of hastily prepared, poorly crafted purchase offers submitted to sellers for consideration.  Don’t let the possibility of multiple offers inhibit you from submitting an offer for a home you’d like.  With realistic expectations and thoughtful presentation your offer stands a better chance than you might imagine.