An important decision for real estate investors is whether to buy properties in the current market or not? First of all, it is important to understand what a seller’s market is. A seller’s market occurs when inventory is low while demand is still high. The main driver to this situation currently is COVID-19 and the fact that many sellers are reluctant to put their properties on the market and expose them to public to go inside their homes. At the same time, the mortgage rate is historically low that make mortgages more affordable and attractive for buyers. A good indication of a seller’s market is the “Sales-to-New Listings Ratio” which is usually 60% or more in a seller’s market. For instance, in January 2021 in Greater Toronto Area (GTA), the % Sales-to-New Listings Ratio has been 73% which had an increase of 15% compared to January 2020.
Going back to our initial question, we should admit that buying an investment property in a seller’s market can look risky, however, at the same time if the investors wait too long, the prices may go too high and the value of investors’ budgets in the bank account may drop way down. Also, while there is a lot of competition in a seller’s market, there are still chances to find great real estate deals. An important point here is to seek professional advices in each and every step to make sure an informed decision is being made.
Here are a few tips for real estate investors in a seller’s market:
- Identify your investment goal and whether you consider a short-, medium- or long-term investment.
- Educate yourself about neighborhoods and locations that could bring you a high return on your investment. A real estate agent with special expertise on investment properties can help you a lot on this step.
- Get financial pre-approval as soon as possible. This will both accelerate the purchasing process in such a fast market, and also enables you to remove financial conditions from your offers to make them more appealing for the seller.