The Importance of Pre-approvals in a Seller's Market

The Vancouver Sun reported yesterday that the latest statistics now put the cities of Toronto and Vancouver into a “Seller’s Market.” But what do the terms “Seller’s Market” and “Buyer’s Market” really mean and what are the pro’s and con’s of each?

A “Seller’s Market” occurs when there are more buyers looking to buy a home than sellers looking to sell their home. This puts increased pressure on prices. The opposite of this is a “Buyer’s Market” where there are more homes listed for sale than buyers looking to purchase them. This causes downward pressure on sale prices as there is a surplus of supply.

So, to figure out if it’s a Buyer’s or a Seller’s Market right now we look to the current trend of sale prices, if they are edging up then it looks like “Seller’s Market” conditions. If prices are falling then it indicates a “Buyer’s Market.” In the Vancouver Sun article, they cite the Teranet-National Bank Composite House Price Index which showed that Vancouver prices edged up, up 0.6 percent for the month.

"Despite the last three months' declines, home prices are still 4.8 percent above their pre-recession peak at the national level, a situation that contrasts sharply with the one prevailing in the U.S., where prices are down 30 percent from their peak dating four years ago," said Marc Pinsonneault, senior economist at National Bank Financial.
"Over the next few months, we would expect price increases to resume in Canada as people try to precede the new (mortgage tightening) measure that will take effect in March.

While it’s obvious that a “Buyer’s Market” is a great situation to be in for someone who is looking to purchase a home, a “Seller’s Market” isn’t as disadvantageous as you might think. Look at it this way, a “Seller’s Market” means that there is a surplus of buyers and not enough homes for sale. This is a strong motivator for people who had been toying with the idea of listing their home for sale to now do so. In a “Seller’s Market” there will typically be a good influx of newly listed homes available to a buyer and that means there will be good deals to be found.

Of course finding a good deal is only half the battle. In order to take advantage of a good deal when you find one you must be able to act fast. That’s why it is very important that you have already spoken to a Mortgage Professional regarding a pre-approval. Our pre-approvals are different from a banks’ because we actually do a full evaluation of your financial situation before pre-approving you and holding an interest rate for you. It’s very possible that your bank is simply holding a rate for you and has not gone through the comprehensive pre-approval process; this leads to delays and possible declines down the line.

Read more: http://www.vancouversun.com/business/Metro+Vancouver+resale+price+indicates+sellers+market/4172028/story.html#ixzz1CGxzUJjh