The real estate market is cyclical, which means it cycles through times when it is a buyer’s market and a seller’s market. In a buyer’s market, buyers have negotiating power for closing costs, purchase price and repairs. In a seller’s market, home prices are driven up due to a decrease in inventory and buyers have little negotiating power. We are currently in a seller’s market, where there is much more demand for homes than there is inventory. This effect is driving up home prices and decreasing the average time homes sit on the market available for sale.

If you are looking to compete in today’s market it’s essential to understand that negotiating techniques and pre-purchase planning have evolved.

The Need to Work With a Real Estate Agent is Essential as a Buyer

It would have been easy to shop for and find a house a few years ago without involving an agent.

Since home inventory is significantly less than any other period in history, it is key to have someone on your side that has a pulse on the local market. Real Estate agents look at availability in the market on a daily basis and they often know of homes that are about to come to market or perhaps “underground” listings that never make it to the MLS site for advertisement.

It is harder to find a house today, especially one that meets your needs and is within your budget. The most significant reason is that homes are not staying on the market long. They are going under contract within days by eager homeowners and investors. There are also delays on the new construction front, which is causing a bottleneck in new construction home purchases.

Couple that with the fact that millions of millennials in their early 30s onward want to buy their first home or upgrade, and you have more demand than supply.

As a result, buyers have one option to get the house they want without too much of a hassle – hiring a real estate agent. With a finger on the market, agents have networks that make it easy to find houses even before they hit the open market, which would mean less competition and a higher chance of acquiring your dream home.

Buyers Need to Have Funds or Financing Ready

Buying a house in the first place is can be stressful. It’s worse when many other buyers are considering the same inventory. Due to the high demand and reduced supply, more buyers are finding themselves in a bidding war.

Unfortunately, these bidding wars end up pushing house prices even higher. However, the biggest winners are those who already have funds in place to move in and close the sale fast.

Sellers don’t want their house to be in the market for too long, so they’ll be happy to take an offer if they know they’ll get paid first.

Buyers are Foregoing Contingencies and Concessions

Contingencies allow you to back out of a contract if it doesn’t meet any or all of your specifications. The most common contingency is an inspection period, to allow you to have time to have a home inspector check all the major components of the home to ensure they are up to code and in good working order. This can include the roof, HVAC, electrical, plumbing, termite inspection, septic inspection, well inspection, pool inspection, among others.

These inspections do cost the buyer a few hundred dollars and usually a few days to a week to get the reports back, which is valuable time in a market where everyone wants to close quickly.

There also customarily is a contingency that the home must appraise for the purchase price for the contract to remain in effect. In today’s market, many buyers are offering to waive this contingency and are willing to take the risk of the home appraising low and they will pay the additional funds at closing just to secure the property.

While it is possible to still get your dream home even in a hot market, it’s important to understand the driving forces of the market and use techniques that work in your favor. A qualified real estate professional will be able to help guide you through this process.