Pfanntastic Home Buyers Handbook
Chapter 7 B. - Making an Offer in Different Market Conditions
In our journey towards buying your 1st home, so far we have covered.
- A broad overview in buying your 1st. Home
- Location, is Everything
- Selecting a Realtor
- Preparing to View Homes
- Watching the Market
- Financing Options
- Finding A Lender
- Getting (Pre) Approved for a Mortgage
- Making and Offer
Please review the previous chapters for more details in our Pfanntastic Home Buyer Handbook Series, and or contact Peter of Linda Pfann.
When we talk about the market conditions in preparation of purchasing your new home. It is important to understand these current and local market conditions before we prepare and submit your offer and to take full advantage of each and every negotiating opportunity for you. Regardless with what may be happening in the rest of the world, real estate remains a very locally influenced commodity, and as such a great economy or a bad event somewhere else has often little or no impact to the Victoria Real Estate Market conditions. In and around Victoria, and on our Island, we seem to be somewhat shielded from many of the fluctuations that affect other areas. That is not to say we are immune to changes, but our market conditions (when they happen) seem to be less severe (up or down) and they do not change as quickly as sometimes in other areas.
We often talk about 3 distinct types of market conditions, they are:
- Buyers Market, where the amount of properties available for sale is so high that with the current number of sales per month it would take 8 or more months to sell out the current inventory (assuming no additional properties are listed for sale)
- Sellers Market, where the amount of properties available for sale is so low that with the current number of sales per month it would take less than 3 to 5 months to sell out the current inventory (assuming no additional properties are listed for sale)
- Balanced Market, where the amount of properties available for sale at a level that with the current number of sales per month it would take approx 6 to 8 months to sell out the current inventory (assuming no additional properties are listed for sale)
What To Do In A Buyer’s Market
In a buyer’s market, you will have more choices when it comes to the types of homes you can purchase. Depending on how long the market favors the buyer, you will also have the luxury of taking your time because bidding wars are much less. When buying your first home, you should check out all your options. That home you couldn’t afford a few years ago may be in your price range today.
When looking for a home in a buyer’s market, you should do the following:
- Stay current with the listings in your area (ask for our Free Market Snapshot Service Right here)
- Sign up for free email listings and newsletters (you can register right here)
- Check out homes that have recently been reduced
- When making an offer, ask for extra's, upgrades, repairs etc. to be paid for by the seller
- See if there are other offers, such as appliances that come with the home
- Ask for certain allowances (carpeting, roofing, siding, etc.)
- Do not be afraid to offer a lower price, and
- Ask for a shorter response time
In a buyer’s market, homeowners may offer these options to you as incentive to buy their homes. They may also offer warranties on appliances that you should take advantage of.
There are dangers that you should consider when buying in a buyer’s market, however.
- If you are not planning on living in the home for more than three years, you may want to wait until the market changes or plan to live in the home longer. Many times, market trends can last for a few years. If you need to move after a year or so, you may have difficulty finding a buyer and you may have to sell the home for less than what you paid for it.
- While most homeowners stay in their homes for at least two years in order to save money in taxes, marketing trends have been known to last longer. You should be prepared for this when buying your first home.
- Make sure a thorough home inspection has been completed before buying the home. If you decide you cannot live there after you have bought the property, you may have difficulty selling it and you will have to spend more money making repairs.
Even though you cannot predict how the market will change, you should consider a home that you can afford, that you will want to live in for a long time, and one that can be improved upon while you own it.
What To Do In A Sellers Market
In a sellers market, you will have to play the game slightly different than you would in a buyer’s market. In this type of market, there are many buyers who will want to buy homes that are attractive and priced within their budget. Homeowners will have their pick of offers to choose from so your offer will have to stand out in more than just price.
When looking for a home in a seller’s market, you should:
- Make an offer that is close to the asking price or slightly over
- Send a pre-qualification letter from your lender with the offer
- Choose a closing date that is sooner rather than later
- Do not ask for too many contingencies
- Send a personal letter
- Promise more of a down payment, and
- Use real estate agents like Peter and Linda Pfann that gets things done quickly
In a seller’s market, you may also want to think about the dangers of buying a home. If you make an offer that is too high and you find out later on that the mortgage payments will be a struggle, you may have to sell. Depending on changes in the market, this may be more difficult than when you were looking for a home.
Buying your first home during this time may also be difficult because you will not be able to put much down, you may only qualify for a certain amount of money which may not be enough to compete during a bidding war, and you may be out bid by those who have more experience than you do.
When you decide to buy a home, you should be looking at your financial and financing situation, the market, and the asking price for the homes you are interested in making an offer on.
If you can wait a few months to see where the market is headed, then maybe this is the best way to save more money and find a home that is affordable. This is a waiting game that no one wants to play, but may be necessary, especially if this is your first home purchase. Mortgage rules and rates are often changing, (as they are right now) and this may change your home buying options and plans more than hoping for a lower asking price, so the real trick is to get comfortable with all your options, and move forward in making a decision.
Seller’s markets and buyer’s markets have their advantages and disadvantages, but in the end, the quality of the offer that you make will determine whether your offer will be accepted. Form our early day in Real Estate in 1986 till now the complexity, preparation, research and the sheer number of issues that are covered and dealt with in your offer, makes it very important to ensure that all the details are fully explained, reviewed and attended to so that your first home purchase will be a Pfanntastic Experience, be sure to let Peter and Linda Pfann assist you every step of the way.
It is always good to know your options and we would encourage you to contact Peter or Linda Pfann, for any questions you may have about the various topics covered in this chapter and the choices available to you to finance and purchase your 1st home.