Buying a home in a seller’s market can be a challenge. Low inventory, enhanced property values, and ambitious buyers give sellers more negotiating power and make it competitive for prospective buyers. Let’s take a closer look at how home buyers can best position themselves for purchasing in a hot real estate market.

Always Begin by Getting Pre-Approved for a Mortgage

Whether it is a buyer’s market, a seller’s market, or you are simply in the market to buy your first, or a new home, it all begins with finding a mortgage lender and getting pre-approved. A pre-approval demonstrates your ability to obtain financing for a home, giving sellers more confidence in accepting your offer.

Look at Homes below Your Maximum Budget

Included in your pre-approval will be a maximum amount you may be eligible to borrow, based on a variety of factors including your income, savings, assets, credit score, and more. In a competitive real estate market homes often sell for above the asking price. Thus, you should consider starting to look at homes that are 15%-25% lower than your maximum pre-approved loan amount so that you have wiggle room to increase your offer if needed.

Don’t Hold Back on Your First Offer

In an environment where inventory is down and demand is high, sellers may expect to receive many offers over a short period of time to consider. This makes negotiating difficult, and places emphasis on your first offer, as it may be the only chance that you get. Contingencies, closing timelines, and other factors can all play significant roles in how strong your offer appears to the seller.

Be Serious with Your Deposit

The earnest money deposit you put down as a part of your offer is a good faith deposit and a signal to the seller regarding the seriousness of your offer. Your earnest money is an amount placed in escrow that you are willing to cede to the seller should you not be able to complete the transaction. Assuming the purchase closes, the earnest money deposit is applied toward your closing costs. Typically, 1% - 3% of the purchase price is a standard earnest money amount, however, in a competitive market, offering a higher deposit may make your offer stand out.

For over 90 years Standard Mortgage (NMLS#: 44912) has helped homebuyers find the best mortgage solutions for their needs.