Insane prices, zero inventory, bidding wars, and more: Would-be homeowners, we feel your pain.
When it comes to real estate, some markets are partying — or at least spending — like it’s 2005. A seller’s market is great if you’re ready to pull up stakes (although you’ll be on the receiving end if it requires taking on a mortgage for a new home), but for buyers it can be a nail-biting, teeth-gnashing, lose-in-the-bottom-of-the-ninth ballgame.
Maybe your city is experiencing a tech boom. Maybe new corporate money has made it a hot spot for recent grads and young families. Maybe it’s suddenly on top of its pro sports game — or has become a foodie destination.
We give you seven reasons buying in a seller’s market can be crazy-making — and links to a few helpful tips on how to survive.
1. Let’s start with pricing
New York and San Francisco grab all the headlines, and for good reason. Hot markets = hot prices. But even cities like Boston can be surprisingly difficult markets for would-be homeowners to break into. In the spring of 2015, the average listing price in 12 Boston neighborhoods was more than a million bucks.
That doesn’t leave much room for entry-level homebuyers.
If you can stomach living outside of your dream neighborhood, it might be worth the move. But make sure you take the time to hone in on the little details that make a neighborhood superbly livable.
2. Next up: Nonexistent inventory
Even in a lukewarm market, when housing inventory is sparse, the competition for available homes can become sharp quickly. Potential sellers who bought during the last boom may still be suffering from equity woes, or fear selling their homes and then wading into a market they can no longer afford. Add in a steadily decreasing number of foreclosures, and you’re left with a housing demand that can far exceed supply.
3. Those bidding wars — oh, those bidding wars
When inventory is low, those bidding wars can escalate into a kamikazelike battle with 17 other buyers to overspend on previously affordable homes. Low inventory + low mortgage rates + out-of-control bidding wars = even higher prices.
While it’s guaranteed to be a stressful experience, there are tips for not just surviving but thriving during a bidding war.
4. The mysterious all-cash buyer
Speaking of bidding wars, there’s often a clear winner, and it’s the unicorn who shows up with a briefcase full of bills. Losing out on house after house to all-cash buyers can be the ultimate frustration.
While not for everyone, a short sale or foreclosure might be the way to beat out those pesky all-cash buyers. But make sure you know what you’re getting into before you start the short-sale process.
5. Extreme bargaining chips
In a cutthroat market, a handwritten letter explaining why you rillyrilly want the house isn’t always going to cut it. (Although it can’t hurt to try.)
Sometimes, prospective buyers move on to more extreme bargaining chips — most notably, waiving the inspection and hoping a home’s foundation is secure. It’s the kind of move that makes your parents (and your real estate agent) blanch in horror. And for good reason.
If you do decide to waive inspection, consider how much money you’ll need to have stashed away for worst-case-scenario home repairs.
6. You could at least make an effort, homeowners
One strange byproduct of a seller’s market: messy prospective homes and even messier homeowners. If you’ve house-hunted in the last year, you may have encountered this phenomenon.
There are the sellers who don’t bother to leave their house during the viewing and instead watch movies on the couch. The open house where owners leave a large playpen in the middle of the living room. The closing where the seller has a full-on meltdown and subsequently threatens to renege on the whole deal. It seems they figure the home will sell no matter what.
Unfortunately, sometimes they’re right. (But we doubt they’re getting top dollar.) Your mission, should you choose to accept it, is to see beyond the messy piles. You just might be able to score a deal that others pass over.
7. Penthouse schmenthouse
It can be rough out there for a homebuyer, especially in a seller’s market. But it can feel even rougher when you find yourself visiting home after home that won’t work for you — because the property descriptions aren’t accurate. While the listing may have touted a penthouse, upon arrival the unit is revealed to be a fourth-floor walk-up studio apartment.
This is why it can be even more important to find an agent who knows the market inside and out and can read between the lines. Otherwise, you may end up spinning your wheels instead of visiting houses you’d love to call home.
What crazy things have you seen as a buyer in a seller’s market? Share your stories in the comments below.