Though it may not be country-wide, many major Candian real estate markets are currently experiencing more potential buyers than homes listed for sale, creating a classic seller’s market in many cities. While the trend is interesting to note, it’s not exactly surprising to many in the industry. RE/MAX’s Canadian Housing Market Outlook suggested that 84% of its agents across the country anticipated a seller’s market this year.
If you live in a Canadian market where homes are selling for over asking with multiple offers, you need to prepare yourself for the challenges of buying in a seller’s market. Here are some tips for purchasing a home in a seller’s market.
Pre-approval is a must
The cost of not getting pre-approved for a mortgage in a seller’s market can’t be understated. In many markets across the country, it will often keep your bid from being accepted. Though it might sound surprising, it’s true that the first thing you should do when trying to buy a home in a seller’s market is apply for a mortgage pre-approval. Shop around for a good rate, get your documentation together, and then meet with a mortgage broker to get pre-approved. The whole process can be completed in few hours, so don’t let it intimidate you.
Sales happen very quickly in hot seller’s markets, so you need to come prepared. Present pre-approval from a reputable lender to have your offer taken into consideration. Don’t risk a home purchase opportunity.
Make strong offers only
We’d recommend getting very close to your best offer, depending on how hot the market is in your area. There is increased demand for homes in a seller’s market, which means that prices will likely be driven higher. Don’t waste your time with lowball offers that aren’t likely to be accepted.
Work with your real estate agent to determine what home sales are looking like in the area. If comparable homes are selling for well over the listing price on a home you’re looking at, you might consider submitting an initial offer that is above the asking price. When sellers receive multiple offers over the asking price, coming in low won’t set you up for success.
Prepare for the competition and potential bidding wars
One of the consequences of a hot seller’s market is that sellers will typically receive multiple offers, giving them negotiating power. You should be prepared to counter if you fall in love with a property, so know your limits and try not to over-leverage yourself.
When looking for a home in a seller’s market, it’s a good idea to search for homes that are listed a bit under your maximum budget. This will save you space to increase your offer should you get caught in a bidding war and leave you with some room to win the negotiation.
An offer letter doesn’t hurt
Submitting an offer letter that introduces yourself to the sellers isn’t likely to swing a deal in your favour - but in a hot market, it’s certainly worth a shot. If you end up being very close to a competing offer, within $1,000 or so, there’s always the chance that the sellers will relate to your unique position and be swayed in your favour.
In your letter, get personal. Explain your situation, offer any stories that you think may sway the seller in your direction, and be complimentary of the home if you see it as a good fit for you. Including a thoughtful offer letter that touches on why you’d love to live in the area is never a bad idea in a seller’s market.
Consider expanding your search
If you have your heart set on a particular neighbourhood or a specific city, it might be hard to heed this advice, but if at all possible expanding your search to nearby locations can help in a seller’s market. Searching for homes on REW in nearby cities is a great way to give yourself more opportunities to find a property you’ll love. Though it isn’t always practical, expanding your search area is a great way to introduce yourself to new places that you may not have previously considered.
Looking into new builds or other property types is another way to expand your home search in a hot market. If you’ve been looking for a detached home, but everything in your area is receiving dozens of offers, a large townhouse might be something you’d be open to considering. If you’re comfortable where you currently live for a few more years, buying a pre-build might be an option that could fit your needs. Explore all of the opportunities available to you before you make any final decisions.
Work with a trusted real estate agent
There are dozens of reasons to work with an experienced real estate agent, so if you haven’t already, be sure to start evaluating agents now. It may take a bit of time to find a match, but you’re much more likely to find the home of your dreams with a good agent on your side than without one. They know the ropes and have seen many of the current market conditions playout in past years.
A trusted agent can make all the difference in a tricky situation, so if you’re buying in a seller’s market, be sure to use your agent as a guide and resource. They should give you guidance on making a solid offer, negotiating, writing an offer letter, and on all of the other items on this list.
Purchasing a home in a seller’s market can be daunting, to say the least. At times, it can even feel like the market is stacked against you. Remember that it only takes one solid offer to land your dream home, and if you follow the tips above, you’ll be on your way to buying in a hot market when inventory is at a premium.