Home Buying Tips for Navigating a Seller’s Market

Several years ago, home buyers had the pick of the litter when it came to purchasing a Southern California property. Decent interest rates and tons of inventory helped first-time buyers easily enter the market. Oh, how the tide has turned. Rising interest rates, low inventory, and high buyer demand put us in a strong seller’s market. As of April 2022, Riverside homes sold for 2.8% above asking on average. And it does not show signs of slowing down anytime soon. So, if you plan on investing in a property during a seller’s market, keep these home buying tips in mind.

Home Buying Tips for Navigating a Seller’s Market

Worst House/Best Neighborhood

Many of today’s buyers prefer a move-in-ready home. But these come at a premium cost. Thus, lowering your expectations and buying a fixer-upper might prove much more budget-friendly…and profitable. For decades, real estate experts suggested buying the worst house in the best neighborhood in order to increase your return on your investment. Just make sure to keep the costs of renovation/repair in mind when putting in your offer.

More Earnest Money, More Attractive the Offer

When a seller accepts your offer, you must place an Earnest Money Deposit in escrow. Also considered “good faith” money, this deposit goes towards your down payment once the sale goes through. Oftentimes, this costs between 1% and 3% of the purchase price of the Inland Empire home. But, as one of my home buying tips in a seller’s market, I suggest that you put at least 3% down if not a little more. Not only does it show the seller that you are serious, but it may also push your offer up high enough to outshine other buyers you compete with.

Get That Pre-Approval Letter

Gone are the days of pre-qualification being enough for a buyer to be taken seriously. Most sellers will not even consider an offer without a pre-approval letter. But if you really want your offer to stand out above the rest, get your loan to pre-underwriting status.

Add an Escalation Clause

If you really believe this house is your dream property, add an escalation clause into your offer when you find yourself competing against other buyers for the home. For example, let’s say that a seller lists their house for $450,000. You are willing to pay as much as $475,000. But you find out that someone else also put in an offer. So, you offer $450,000 but add in an escalation clause that states you will pay $5,000 above the highest offer up to $475,000. Your offer never rises above your limit but it also does not go higher than $5,000 over the highest offer either. That might be just enough to make a seller accept it.

Lease-Back Option

Once a homeowner sells their property, they need to find another home. A 30-day escrow may not provide enough time to do so. So, another one of my home buying tips to follow in a seller’s market is to offer a lease-back option. This allows the seller to stay in the property for a specific time period (usually 30 to 60 days after the close of the sale) and for a specific amount of money per month. Basically, once the buyer becomes the owner, they also become the landlord for a short time.

Not all of these options work for every situation. Talk to your REALTOR® to determine which ones offer the best advantage for you to seal the deal. When you decide you want to look for your next Inland Empire home, contact me. I’m always ready to help you navigate the market, whatever it may be.

Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty