While living on Cape Cod can sometimes feel like living in your own little world that begins at the canal and ends at Race Point Beach in Provincetown, the reality is we are subject to the whims of larger regional and national real estate market forces. Combine decades of decreasing new home construction, record-low interest rates, and Covid’s impact on worker migration patterns, and you’ve got yourself a perfect storm of high demand and incredibly low home inventory.
Now add second-home buyer demand, geographical constraints, skilled labor shortages, and super pricey building materials and it all adds up to one of the strongest Seller’s Markets in recorded history across Cape Cod & the Islands, New England, and the US at large.
So what can you do as a Buyer entering this market to ensure you find a home that fits your needs? It’s time to focus, bring your A-game, and avoid some common mistakes that cost many buyers their dream homes.
1. Get Preapproved for a Loan.
Cash is King right now, and it may seem impossible to compete for a home on Cape Cod without $500K in the bank, but the reality is that over 60% of homes that went under contract in April 2021 used financing. So there is hope! And while you may be confident that you’ll be approved for a mortgage loan based on your steady income, your low debt-to-income ratio, and your high credit score — the seller isn’t. The only way to prove to the seller that you’re a qualified buyer is to be preapproved by a lender. Preapproval is absolutely paramount. A buyer has zero advantage if they do not have the cash to purchase without a mortgage and haven’t taken the time to speak with a lender. Not getting preapproved sends a message to the seller that the buyer isn’t taking their house hunting seriously.
Know The Difference Between Prequalification & Preapproval
You may have heard the terms “Prequalification” and “Preapproval” thrown around, or even used interchangeably. Prequalification means that you simply told your lender your financial story. Preapproval involves submitting a mortgage application, complete with providing verifying documents. Preapproval from a reputable lender is key. Presenting this shows the seller that the buyer has already set the wheels in motion and is serious about making [the deal] a reality. In this market, you really don’t have a chance without a pre-approval in hand prior to submitting an offer. Most agents won’t even consider working with a prequalification, whether they are on the buy side or the listing side. ++So don’t wait!
2. Be Prepared and Reachable
In a seller’s market, houses go in the blink of an eye. Your real estate agent may know about a home that’s perfect for you and is minutes away from being listed, which starts the timer on making an offer. If they try to contact you and you’re not available, that house could be gone before you even get to make an offer. Always be ready. Make a game plan with your agent and be sure to keep avenues of communication open, it could mean the difference between landing the home of your dreams, or missing out to a better-prepared buyer.
3. Be Realistic
Searching for that home that doesn’t exist will just cause frustration and waste valuable time. What your brother bought two years ago or what your friend bought a year ago probably (or definitely) doesn’t exist in today’s market. Your agent can provide you with a quick search of sold homes in the past year and will help you find where your reality lies.
Deal with the inventory that is in front of you. That is your reality. If you see 10 -15 houses in a certain price range, in a given community, this gives you a great indication of what is available.
4. Make Your Best Offer
The motivation to buy what we want for as little money as possible is deeply ingrained in us as Americans. We are always looking for a sale or a discount when making purchases. So when most people see the listing price of a home, they naturally wonder what they can really get the house for. Offering lower than the asking price is a reasonable strategy in a balanced market, especially if the house is overpriced compared with other similar homes in the area (your agent will run a CMA on the property to determine its current market value), or if it’s a buyer’s market with lots of available inventory. But trying to get a deal when you’re in a seller’s market might not be the best tactic. In a seller’s market, many buyers do not step up with a strong enough offer. The reality is that we are experiencing a historic shortage of inventory, and the competition is unusually fierce. Now is the time to come in with your strongest possible opening offer.
5. Don't Over-Analyze the Purchase Price
Just as impulse-buying a home is risky, over-analyzing a home purchase in a seller’s market is ill-advised as well. When you wait too long you run a high risk of losing the home you have fallen in love with. Once you’ve determined the type of home you want, the location you desire, and your price range, and finally find a home that meets your qualifications, don’t wait to make an offer. To give yourself more leverage, be prepared to move quickly by having your finances in order — get a preapproval. Know how much you can truly afford, repair any credit issues, have your down payment in hand, and delay any other major purchases. Just don’t overthink it. Trust your agent who is ethically bound to work with your best interests in mind.
6. Work with an Experienced LOCAL Agent
In a seller’s market (or any market really), it benefits buyers to get all the help they can - and you’re really going to need all the help you can get in today’s market. If you have the right seasoned LOCAL agent on your side, you’ll have a better chance of getting the home you want for a price you can afford. Additionally, buyers don’t pay real estate agents directly; their fee comes from the proceeds of the sale of the home you are purchasing. When you are competing against other buyers in a fast-paced market, it is vital to be ‘offer-ready. Working with a real estate professional saves tons of time and stress, as they know the ins and outs of the process and can provide tremendous insight regarding upcoming inventory. Checking out an agent’s sales history, client reviews, and history of working in the market you’re looking in are all great ways to ensure you’re working with a local expert.
7. Be Prepared for a Bidding War
If there is ever a time when a bidding war could be imminent, it’s during a seller’s market. Be sure to discuss the possibility (inevitability) of a bidding war on the properties you are interested in. While no buyer wants to be involved in such a battle for fear of possibly going over budget, unfortunately, they have become the norm here on Cape Cod in 2021. Ask your agent early on how they would approach a bidding war and set your search below your max budget to leave room in case of an over-asking bidding war.
8. Don’t Overpay
It is easy to get frustrated in a seller’s market with how many times your offer has been overlooked, rejected, or even ignored. Even so, it is important that you always stay within your budget. Talk to your real estate agent about ways to ensure that you don’t overspend, and be sure to check out comparable houses so you can familiarize yourself with the typical features of a home in your price range. No reputable agent will encourage their clients to spend more money on a home than they can reasonably afford. It’s not all about purchase price either. You have to take into account the local taxes, HOA fees, the potential for flood insurance, and many other factors. It is easy to get caught up in the hysteria of a fast-paced market, but your agent will guide you through and ensure you don’t overextend your finances.
9. Learn From Your Mistakes
There’s no shame in having your offer declined, though it is easy to get frustrated if your offers are declined repeatedly, one after another. In this market, unless you are a cash buyer who is comfortable with paying the difference in cash for a property that appraises under the purchase price, this is a situation you will almost certainly face. It is vital to learn from your last offer(s) so you can approach future offers more confidently and eventually move into your dream home. Buying a house is a lot like dating. You probably have to let a few keepers slip through your fingers, have a couple sleepless nights over it, and then come back with serious intent to lock up the next greatest opportunity in front of you. You will likely receive feedback with your rejected offer, and armed with that information be able to avoid future rejections and approach future opportunities with a fresh perspective.
10. Don’t Give Up
Here’s the deal, y’all: It is way more challenging to find the perfect home in a seller’s market. You will absolutely experience setbacks. When you’ve heard that even your best offer has been rejected, it can be devastating. No one likes rejection! With that being said, giving up won’t help. Instead, talk with your real estate agent to figure out what went wrong and how you can improve, then implement a new plan of action and go after the next house. Keep your expectations realistic. If you are using financing and are up against cash offers, understand it isn’t you the seller is rejecting, but your offer. Why would they take unnecessary risks? Remember that the real estate market is forever changing, demand ebbs and flows, as does inventory. So in the worst-case scenario, you can always wait until your position is stronger relative to what is available in our market.
It’s all about YOU!
Are you guilty of making any of these mistakes in your home search? Sometimes finding success as a buyer in a Seller’s Market is as simple as working with the right real estate agent. If you are about to embark on purchasing a home here on Cape Cod, or are looking to shift tactics in hope of finding success in this market, we are here to help. Reach out today to schedule a confidential, no-obligation consultation today!
Share your experiences finding a home on Cape Cod during this Seller’s Market in the comments below!