Minnesota is becoming an increasingly appealing relocating state for many home buyers. Minneapolis real estate alone has appreciated by almost a third over the past decade. However, the landscape of the national real estate market has changed in the past few months. Until recently, a buyer’s market, favoriting the individual looking to make a purchase, is now dominated by sellers and geared towards fulfilling their sale needs. A seller’s market is different from a buyer’s market in many ways; therefore, it is imperative that you earn a competitive advantage before you begin your house search or negotiations. Here is everything you will want to know to conclude the purchase of your dreams in a seller-friendly market.
You Will Need To Become A Competitive Buyer To Close A Purchase
The current real estate landscape prevents buyers from benefiting from some of the advantages they used to gain in negotiations, for instance, through the pre-approval of their financing. Pre-approvals used to give buyers a competitive edge, attesting to the legitimacy of their desire for a purchase, their ability to pay for it, and their due diligence initiative. However, pre-approvals are now a requirement for all home purchases. Prospective buyers must prove that they have pre-qualified for the purchase of a home in the relevant price range before entering into negotiations with sellers. This places everyone on equal footing by making pre-qualification a universal minimum requirement.
However, the market has also shifted in a way that may serve to your advantage, as the passionate buyer of a home they love. The desire for financial certainty in conveyancing has made sellers eager for all-cash offers. In return, this has compromised the “quality” of the average competitive buyer, from a family looking to love and care for a home, to a property developer looking to tear it down to make a profit or begin renting to various tenants. Therefore, you will need to be willing to convince the seller that they will gain more from selling to you, in peace of mind (from knowing the home is in good hands), and the pure joy of knowing they have allowed a family to fulfill their homeownership dream.
A Seller’s Market Employs Unique Tactics
There are common staples of a seller’s market. For one, the market will always try and drive competition for offers. There are several methods home sellers use to go about this:
- Deferred showings
- Highest And Best offers
- “Coming soon” signs
Deferred showings entail the estate agent in charge of the listing, putting up an ad for an open house several days in advance. Typically, these listings will be posted on a Monday morning, for showings over the weekend. This tactic aims to build up the anticipation to see the home over the week and create a resulting sense of urgency in prospective buyers. This method is often used on popular listings — within the median price range of a neighborhood but with a strong location — likely to garner feverish interest. Your best bet in such a situation is to remain calm, take your time making only the offers you find fair (and would have no trouble financing), and remaining in contact with the listing agent. It isn’t uncommon for offers made at a showing to fall through later in the negotiation process. You may have a future opportunity to swoop in for an “alternative” offer with your desired buying price.
“Highest and Best” offers encourage buyers to offer the most money they can do for a home, as well as the most enticing conditions. However, this often nullifies the home’s valuation in the eyes of the listing agent; therefore, prospective buyers should be discouraged from bidding higher than a home is worth to secure the purchase. When your prospective purchase is a “highest and best” scenario, it is important to make an offer devoid of emotions. Work with a real estate agent to get an accurate valuation on the property and do not steer from it too drastically.
“Coming soon” signs are targeted at buyers looking to get ahead of the competition and confident that a “good deal” will require “getting an offer across early.” They serve to prey on anxious buyers and are a highly controversial real estate practice. However, the realtor you will contact directly, as per indications on “coming soon” signs will operate as a transaction-broker, who may have more predatorial practices to get you to sign, as their commissions are substantial. They are often versed in acquiring information on your current situation and needs (for instance, how soon you need to move or whether you have a large family) and using it to the seller’s advantage. Therefore, you will need your own representation by enlisting the services of a buyer’s agent to ensure the negotiations are fair and reflective of your needs.
A Concluding Note
To protect yourself from a disappointing purchase or a challenging closing process, you will need to seek out professional guidance to negotiate on your behalf and help you with the necessary legal documents. A buyer’s agent does not get paid a fee, but rather a part of the purchase commission once you close your deal. By informing yourself on the newest sale tactics used in your real estate market, you can protect yourself from predatory practices, and even use a competitor’s advantage.
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About Transition Realty
Transition Realty owner Steve Lehmeyer specializes in helping people manage real estate transactions in the Minneapolis/St. Paul area. His experience in the Minnesota real estate market spans 20 years. Steve and his team work with clients to buy & sell single-family homes, townhouses, condos, lake homes, and investment property. Download a free home search app for your smartphone or search the MLS at TransitionRealty.com.