How to Compete in a Seller's Housing Market

Buyers must be ready to pounce when they find the right house or condo.

Middle aged couple (30s and 40s), standing in front of house. For Sale sign out of focus in foreground.

As you narrow your choice of neighborhoods, talk to people who live there, including walking the streets and talking to neighbors. Attend open houses in those neighborhoods. That gives you an opportunity to talk to agents and evaluate homes without any pressure.

It's crucial to get as much information as you can before you begin your home search. Once you find a house you like, you won't have time to investigate the neighborhood before you make an offer.

Find the right agent. The role of the real estate agent has changed considerably in recent years. No longer do you need an agent to find your listings. Many buyers send their agents lists of homes they'd like to see.

Still, the choice of agent is important because the right agent can make or break a deal. There is no cost to a buyer to use a real estate agent, but that doesn't mean you should work with the first agent you meet at an open house.

Buyers should interview several agents to find the right match. Ask friends and co-workers for referrals and see whose signs dominate in your target neighborhoods. An agent who has a lot of contacts in a neighborhood may have access to "pocket listings" of homes that are not in the MLS.

[Read: 7 Reasons to Buy a House Before 2014.]

"Buyers often think the buyers' agent is there to find them the house," Aaron says. "It's not like it was 25 years ago when you waited for your agent to tell you something had gone on the market. ... Finding the home, that's the easy part."

Most buyers need an agent to help them navigate the process, including crafting and negotiating the offer and dealing with issues that may arise with inspections and appraisals.

Be flexible in what you'll accept. First-time buyers are often swayed by décor, and they don't always understand what features of a house can and cannot be changed. It's a lot easier to add stainless steel appliances than it is to add a bathroom or change a floor plan. A new roof can be installed quickly and easily in a few days, while a kitchen renovation may take months. And location, of course, can never be changed.

"Buyers are more realistic than they used to be … because the market is demanding that they be," Aaron said. "If not, you're just going to be on a wild goose chase."

Move fast and be flexible on terms. Set up automatic alerts to be notified by email or text message when homes go on the market or prices are reduced. If your agent doesn't set that up for you, do it yourself on one of the online portals.

Once you find a house you like, be prepared to act. In the hottest markets, a well-priced listing in a good neighborhood may draw multiple offers on the day it's listed.

Agents advise drawing up an offer with as few contingences as possible. That could include agreeing to pay the difference between the contract price and the appraisal value in cash, shortening the time for inspections or even waiving the financing contingency if you're sure you've got the financing locked up. Aaron also advises submitting backup offers on homes you like, because if the first deal falls through, you're next in line for the house.

[See: A Step-by-Step Guide to Homebuying.]

If you can, find out what is most important to the seller, whether it's a quick closing, more money or knowing that the house where he raised is children is going to another nice family. Sometimes the seller wants to stay longer. "A lot of times when things are moving so quickly, the seller isn't prepared with a place to go," said Bo Mastykaz, a Redfin agent in Miami.

Amid the current frenzy, it's easy to get so caught up in home-buying fervor that you sign a contract for a house you don't like or can't afford. While you're going to have to make some compromises, you don't want to make compromises you'll regret later.

"Buying a house is emotional," Strauch says. "Don't be afraid to walk away when it's not the right house for you or it's not the right financial terms for you."