We are still in a seller’s market and inventory is hitting lows we haven’t seen since the peak back in 2005.
When you are trying to buy in a market like this one it can get frustrating, especially when you approach it the same way you would approach a normal or balanced market. That is really the basic problem is very much like attempting to drive on a wet or icy road the same way you’d drive on a dry one.
Real Estate and Umbrellas
You’ve lived in L.A. for the past 10 years and it has only rained about 5 times. Then you move to Florida and walk to work from home each day. You never bring an umbrella because it never rains – at least it never did in L.A. Then you find out the hard way that Florida and L.A. don’t have the same climate.
This may seem simplistic or completely unrelated, but it is being used to make a specific point – what is workable in one location or time period is not necessarily workable in a different location or time period.
This applies to businesses and the need to operate differently in different economic situations, or employees and employers when unemployment levels are high as opposed to when they are low.
To get any desired outcome you need to take the appropriate actions based on the actual conditions that exist at that particular time.
In most areas right now we are in a seller’s market with extremely low levels of properties available to purchase. That is the current condition in many of the areas you will be looking at for your purchase. Those conditions are completely different from a balanced or normal market where there is an adequate number of properties for the level of buyers looking to purchase – so right now we need to be in the present and take actions that fit the present conditions to have any chance at success.
Applying This to the Current Seller’s Market
First you need to know the current conditions for the areas, type of property and price ranges you are looking at. Even though it is mainly a seller’s market at this time, there are locations, types of properties and price ranges where it is not a seller’s market and may even be leaning toward a buyer’s market. This is always the first step.
If your agent has determined that the location, type of property and/or price range you are looking in mean you will be facing seller’s market conditions, then you will need to know what this means.
In many cases it means that you will have to be a little more flexible with your criteria. Since there are not many homes or condos for sale your ability to get exactly what you want for the price you want is going to be very restricted.
In some cases it means that you may be competing against another buyer or several buyers.
When working with buyer clients it sometimes takes a little time for them to fully grasp how things are in the current seller’s market, even when I have told them several times what they would likely experience. One Los Angeles client recently asked about a home that wasn’t anything spectacular, was in a nice area but not a high-end area and did not have fancy upgrades – even with it being priced a little over $1 million dollars it has 16 offers within about a week of being listed!
Getting frustrated about the market conditions you are having to deal with does not get any kind of real, positive result. What does get a result is understanding the actual current market conditions, knowing what you will be facing in the way of obstacles, and then either not buying until the market changes or getting the right strategy to be successful in this type of market. Protesting the way things are won’t get you a home – being clever about how to work within or around the existing conditions will!
The Top 4 Necessities for Buyers
To be a successful buyer in this current market you will absolutely need these 4 things:
1. Proof that you are a strong buyer financially. Since sellers know there are a lot of people wanting to buy right now, they want to make sure that whoever they go to contract with for the purchase of their property is in a financial condition to definitely close on the deal. This is true if you are the only person making an offer or if you are competing with 15 other buyers.
You need to have proof from your bank (either a bank statement or a letter on the bank letterhead) that you have the cash to make the purchase or you need a preapproval/loan commitment letter from a respectable lender showing that you have been found to qualify for financing based on documentation reviewed by that lender. Without one or the other of these your offer probably won’t even be looked at – so make sure you get this preparatory step done before you start seriously looking.
2. A good understanding of what you need and want as well as what is an isn’t acceptable to you. The more certainty you have about what you like and don’t like, the faster you will be able to decide and act. The more things that are ‘maybe’ for you, the more difficulty you will have in finding what you want or acting once you find something that would work for you. You can always change, broaden and refine your criteria but at any one time you need to know if something will or won’t work for you.
3. An ability to decide and act quickly. The will require that you know what you want and what you don’t as described in #2 above. But this also requires planning. If you work during the day and can’t go see houses until the evening or even the weekend, it may be more difficult to beat out other buyers when the right house does come along. If you are restricted by your work schedule then try to work out an alternative solution such as a family member or friend going to see properties for you, or having your agent do FaceTime or Skype when they find something they think you might like.
If there is more than one person involved in the decision, a plan should be worked out so that when something comes up you won’t lose precious time trying to reach or get answers from the other person/people while still ensuring they do get to participate in the decision
4. The right professionals working for you. If you don’t have experts handling your financing or dealing with the showings and offer preparation, ones who not only have experience in a market like this one but also have special methods they use that can give you an advantage, you will have a much more difficult time getting what you want while still being protected.
The goal in this market is to buy something you will be happy with for years to come while still ensuring you don’t overpay or overlook property condition issues that you don’t want.
If you have all 4 of those things in place then you have the best possible chance of success as a buyer in the current market. If you are missing one or more of them, then you should either wait until we move into a more balance market or you should work on getting the remaining items you need before you get into serious buying mode.