In the real estate market, there are rates between demand and supply in regard to buying and selling real estate properties. When demand over real estate properties exceeds supply or the number of buyers seeking and looking to purchase real estate properties is more than the available properties in the market, the market becomes a seller’s market. This, in many cases, creates a situation where multiple buyers become interested in purchasing the same property, resulting in bidding wars and giving the seller the chance to increase the property’s value.
What Is Up With the US Housing Market in 2018?
Economic analysts believe that the US housing market of 2018 will continue to be a seller’s market because the inventory is at historically low levels and demand for properties and housing is high. Moreover, real estate experts believe that the scarcity of available investment properties in the real estate market will give private and institutional sellers the opportunity to keep prices high, especially as a growing segment of millennial buyers is increasing. However, mortgage rates, which are expected to rise on average to almost 4.5% by the end of 2018, could tip the balance of power to buyers and give them more room to negotiate with sellers.
The January 2018 housing analysis released by Realtor.com indicates that housing affordability for first-time buyers combined with low inventory creates a seller’s market. Inventory in 2018 is selling faster compared to January 2017 and the real estate market is facing a housing shortage. In 2018, the median listing price is $269,500 which increased 8% compared to January 2017 while days on market is 89 (7% down compared to 2017). Moreover, inventory is 8% down compared to 2017, reaching only 1.23 million listings. However, there are still efficient ways to buy an investment property in a seller’s market.
Do you want to know about the US housing market 2018 in detail? Read “Is the 2018 US Housing Market a Seller’s Market or a Buyer’s Market?“
Tips on Buying an Investment Property in a Seller’s Market
Planning Planning Planning
Purchasing an investment property in a seller’s market requires extra caution as you have to quickly make offers because, in a seller’s market, properties are sold very quickly. Therefore, you should have a plan as to what type of investment property you want to purchase. Just because timing is key when buying an investment property in a seller’s market, this does not mean jumping into any investment property you find because you are scared that properties are sold quickly. What we are saying is that you have to check different offers and decide very quickly on what property you want to purchase. Negotiation skills are very important in the purchasing process, so make sure you make the seller feels that your offer is great and that you know exactly what you are doing. Planning and finding a balance between your expectations, offers, and the type of property you want to buy in a seller’s market helps you navigate the buying process successfully.
Read “The Best Time for Buying Real Estate Investment Properties“ to know the best timing to buy an investment property.
Sort Out Your Finances
In a seller’s market, sellers always take the advantage of inventory shortages and raise the price of their property. Regardless of how good of a real estate investor you are, the ultimate goal of sellers is to generate money and make lucrative investments; therefore, they will end up selling their property to the buyers who offer the highest price. However, having a solid and detailed financing plan is another key to success when buying an investment property in a seller’s market. Sellers want to make sure that they get the payment on time and that you are able to complete the finances of purchasing the property on time and efficiently. Thus, having financial plans that secure the finance of buying the property gives sellers a sense of relief that they can get their money on time and that you are a customer that they can rely on. It will also increase your professionalism as a real estate investor and help you get the best deal you can get in a seller’s market.
Benefit From Networking
You probably by now have heard a lot about the importance of networking in real estate investing and it definitely comes in handy when buying an investment property in a seller’s market. Purchasing a property in a seller’s market is all about finding the deal you are looking for as quickly as possible. Therefore, having connections and networking with investors, real estate experts, agents, buyers, and sellers may lead you to a deal that you could have never heard about or got in any other way. Even if you think you found a good deal and that you do not have to network with people working in the real estate investment field, it does no harm to ask and keep your eyes open for any purchase deals you can get in a competitive market like the seller’s market.
Know Where to Search
Another tip that helps you go through the process of buying an investment property in a seller’s market is knowing where to search and how. As you know by now, a seller’s market is a hot market for sellers, so it is super easy for them to sell their properties and raise their prices in hot locations that are known to almost all real estate investors and buyers. If you really want to get a good deal with a reasonable price, try to walk the path less traveled by other real estate investors. Try to search for investment properties in locations that are not that common to other buyers. This will give you the chance to be the main player in the purchasing process as the competition in less common locations is not as harsh.
But do not get me wrong, I am not telling you to settle down for any property you find away from buyers’ competition. You have to find something that matches your expectations by studying the return on investment rate, cash on cash return and how successful your investment might be. In a nutshell, try to look at the wider image of everything available in the seller’s market and do not neglect certain locations or deals. This, however, needs an advanced and thorough knowledge of the real estate market. Therefore, never stop learning about anything related to real estate investments and the seller’s market in this case.
Working with a Professional Agent
As buying an investment property in a seller’s market requires knowledge and quick yet efficient decision-making, it is advisable, particularly if you are a beginner investor, to work with a local real estate agent to help you get good deals. Real estate agents will be able to come up with a strategy for getting the best deal in a seller’s market. Due to their experience and professionalism in the field, real estate agents will know what you need to offer in order to compete with other potential buyers or maybe sway the property owner to accept a lower price. However, in order to get that, you have to work with an agent that you trust and an agent that will not push you beyond what you want or feel comfortable offering or getting.
Be Ready to Compete
The main reason as to why you have to be extra cautious and make quick decisions when buying a property in a seller’s market is the competition that arises between buyers and the bidding wars that happen here and there. If other buyers are interested in the same property you are making an offer on, trying to get a lower sale price probably won’t work to your advantage. In fact, you could lose the opportunity to purchase the property altogether if a competing buyer makes a higher offer. Therefore, you have to be aware of that and always be ready to compete and indulge in bidding wars.
Buying an investment property, whether in a buyer’s market or seller’s market, requires knowledge, experience, real estate investment professionalism and negotiation skills. Following the above-mentioned tips will certainly help you go through the purchasing process in a seller’s market successfully. But first, make sure to sign up for Mashvisor to get real estate investment guidance at your fingertips.
What do you need to consider before buying an investment property? Read “What You Need to Consider Before Buying Investment Property“ to know the answer.