Buying a home in a competitive real estate market isn’t for the faint of heart.
It can mean seeing more homes than usual, putting in many offers, and doing more legwork than if the market were softer.
That doesn’t mean, though, finding the perfect home and getting a great deal can’t be done. Here’s what shoppers, first-time homebuyers or not, need to know to navigate a hot market and win their dream home in a sea of competition.
What Exactly Is a Hot Market?
To put it in its simplest terms, a “hot market” is one when real estate inventory is low and demand is high, meaning many other buyers are looking to purchase a home as well.
It can often mean that homes enter the market and stay only briefly before selling at or above asking price. In general, if homes remain for sale for four to six months, it’s a balanced market of buyers and sellers.
However, if homes are selling faster than that, say in mere days or weeks, it’s typically considered a hot—or seller’s—market. If homes are sitting for longer than that, it’s regarded as a buyer’s market.
A hot market can come and go pretty quickly, fueled by job growth, new construction, and appeal to millennials, according to Realtor.com ’s 2019 Top Markets for Homebuyers report. Destinations that made that list included Lakeland, Florida; Grand Rapids, Michigan; El Paso, Texas; Chattanooga, Tennessee; Phoenix; Bridgeport, Connecticut; Las Vegas; Boise City, Idaho; Miami; and Boston.
A hot market may sound tough to enter, but there are a few ways buyers can stand out from the pack and, with luck, win over a seller.
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Hot House Market Buying Tips
1. Hiring a Non-Tepid Agent
Hot market or not, a great agent can make all the difference in the homebuying process. An agent can help a buyer navigate choppy waters and will be the person buyers can turn to with questions about the market, the homes they are looking at, and much more.
A buyer’s agent is legally bound to help the buyer. A good agent will know what to look for in a home, may be able to recommend new neighborhoods buyers haven’t thought of, and can steer shoppers to good deals and away from bad ones.
2. Listing Musts and Wants
In a hot market, buyers may need to be more flexible about their ideal home and location. Before looking at homes, it might be wise to create a list of “must-haves” vs. “nice to have” items.
If buyers know they can’t live without at least two bedrooms and two bathrooms, they should put that on their “must have” list. If they would like to have an in-home office but don’t need it, they can add that to the “nice to have” list.
It will probably help buyers to go through every item—garage, square footage, yard space, fireplace, schools—and draw their line in the sand. If a home doesn’t have everything on their “must” list, they can move on quickly. But if a property meets all the “musts,” perhaps it can have the “nice to have” items later via renovations.
3. Adding Sweeteners to an Offer
In a hot market, adding a few perks to a home offer can further tempt the seller because every little bit helps when there is the potential for multiple offers.
For example, sellers eager to move on could be enticed to go with buyers who can act quickly. To offer a quick close, buyers can ask their real estate agent to find out the standard closing time for the home and add to their offer that they are willing to close faster.
4. Offering All Cash
This most certainly isn’t an option for everyone, but if a buyer can offer all cash for a home, this may be the thing that tips the odds in their favor of winning a bid.
Sellers typically prefer all-cash offers because they present fewer hurdles than buyers who are going with a lender. Financing issues account for 27% of delays in closing contracts, according to the 2020 Realtors Confidence Index Survey .
“Cash is king,” maybe you’ve heard. With a cash offer, there is no waiting for pre-approvals or approvals.
5. Waiving Contingencies
Looking to stand out further? Buyers could try waiving contingencies where they can.
There are lower risk contingencies people can waive, such as homeowner association contingencies, but there are also higher risk ones for buyers that could convince a seller to choose their offer.
For example, buyers can waive their right to an inspection. This means they will not require a professional inspector to check over the home for potential repairs. By waiving this contingency, though, buyers will be purchasing a home with many unknowns and taking on the full risk of a home that may need hidden repairs.
Nearly 20% of successful offers submitted by Redfin agents in select major U.S. markets waived the inspection contingency in mid-2020, and nearly the same percentage waived the appraisal contingency, Redfin reported.
Before waiving any contingency, it’s a good idea for buyers to have a long talk with their agent to ensure they are still protecting their rights and feel comfortable with any consequences.
6. Giving It a ‘Best and Final’ Offer
In a hot market, odds are buyers won’t win any bids that are under asking price. If the house is right when it comes time for the best and final offer, buyers may want to consider trying to give it their all. That would mean coming in at asking, and sometimes going over.
This is an important consideration when looking at homes in a hot market. Buyers may want to look at homes under their very top budget so they have room to negotiate up to, or over, asking.
Again, like contingencies, buyers should never go into a price range they are uncomfortable with or cannot afford in the long run. (Want to see how much a home could cost over the lifetime of a loan? Check out SoFi’s mortgage calculator to get an idea.)
7. Writing an Epic Letter
There is one more way to try to win a seller over: by pulling on their heartstrings.
When putting in an offer, many real estate agents advise their clients to write a short letter to the seller on why they want to purchase the home.
Remember, selling a home can be emotional, and letting go of all the memories built in the space can be hard on the seller. But if they know that the next person to live in the home will love it as much as they do, they may be more willing to part with the property.
Buyers might want to express what they love about the home and how they plan to continue making happy memories there. As a bonus, buyers can try including a picture of their family with the letter so the seller thinks of them as people rather than just an offer.
8. Not Getting Discouraged
In a hot market, it’s important to stay patient. Going through the process could mean putting in multiple offers on multiple properties and losing out more than once.
According to Realtor.com, the average homebuyer visits 10 potential homes in 10 weeks before finding the right one. Give it time and stay focused on the prize.
Having Your Finances in Order
Before putting in an offer on a home in a hot market, it’s a good idea for buyers to have all their fiscal ducks in a row. That could mean shopping for the lender that’s right for them and/or getting a pre-approval letter to show they are serious buyers.
Different lenders will likely offer different rates, terms, and perks, which buyers can weigh to decide which mortgage lender is right for them.
With SoFi® a buyer could qualify for a home loan with as little as 10% down, get a competitive rate, and seal the deal.
It takes just two minutes to get pre-qualified online.
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