Tips for Buying a Home in a Low Inventory Market
Many real estate markets across the United States are currently experiencing low inventory. Several factors contribute to low inventory in markets. The largest driving factor lately has been low-interest rates and currently (March 2020) the coronavirus. Buyers want to take advantage of these rates before they rise and are eager to enter the housing market. However, many homeowners already have low-interest rates on their homes and may not be keen on selling and moving. Navigating a market with limited inventory can be an extra challenge, but can be done successfully following the tips below. With regards to home buying during the coronavirus pandemic, read my blog specifically about that using this link.
1- Be Financially Secure
Take the appropriate steps to have your financing secured before you go to look at houses. Get a mortgage pre-approval and have all the necessary documentation ready to send into your lender. Do not enter the housing market until you are fully financially prepared with a solid down payment and a reputable loan. This will help you stand out to sellers when you make an offer on a house.
2- Be Realistic About What You Can Afford
Most homebuyers do not buy the perfect house. The truth is the average home buyer does not have an unlimited budget and therefore must make compromises on their home purchase. Keep an open mind while looking at houses and understand that the goal is to find a home that meets all of your needs and most of your wants. Be open to making changes to a home to create the exact home you are looking for. Get your pre-approval and talk with your lender about your different loan options. This chart is an example from Tina Mitchell of Highlands Residential Mortgage showing how some of the different loan options can vary.
This chart was provided by Tina Mitchell of Highlands Residential Mortgage. It is an example of how loan programs can vary depending on several factors. Click this image to be taken to Tina’s website and contact her today for your own custom information.
3- Avoid Looking at Houses at the Very Top of Your Budget.
In low inventory markets, houses tend to sell over asking price due to competition amongst buyers. Therefore, it is wise to stay away from homes that are at the absolute top of your price range. If you are approved for $350,000 it is wise to look at home $340,000 or less which will allow you to bid a little higher on a house. Also, you won’t fall in love with a house that ultimately, you won’t be able to buy. ** Know what your top budget is. In the example spreadsheet above, highlighted in green, you can see that the monthly payment amount for every $10K in purchase price is $30-50/month, depending on the loan program.
4- Put Your Best Offer Forward
In low inventory markets, it is critical that you put your best offer forward. Most likely, you will be competing against other offers, therefore, there typically isn’t a lot of negotiating that goes on. Talk with your Realtor about strategies. I have SEVERAL effective strategies to help clients win the homes they want. Every situation is different. I will provide the information to you, research about the home, feel out the other agent, and explain several different strategies to you. Ask me for more details, I would love to tell you more about how these strategies often win during multiple offers. Sometimes it’s about more than just money - trust and terms also are taken into account.
These are just some of the multiple offer strategies. There are many options! It’s not always just price - but often terms as well as confidence in the buyer, lender & buyer’s agent. Let’s talk about your options!
5- Be Ready To Move
Real estate markets with low inventory turn over quickly. Most buyers and sellers have contingencies on other contracts that restrict the amount of time before they can close. The average contract length is shorter and requires you as a buyer, to be ready to move quickly. Start packing and researching your moving options early in the process, so the moving process is as seamless as possible once you’re under contract. If you are able, work with a lender who can accept all your documentation and run your pre-approval through underwriting before you start looking at homes. This is a stronger pre-approval and usually allows the lender to complete your closing in a shorter time. 30 days has traditionally been an average closing period. Cash can close in a week. Ask your lender up front how quickly they can close your purchase. A short closing timeline is usually an attractive term to sellers who are selling a vacant home.
Purchasing the home you want is possible even in a market with limited inventory. Be prepared and manage your expectations throughout the process and ultimately you will find a home that you love. If you ask any of my clients, they will tell you I am persistent and work hard to help my clients find and get the homes they want. Whether there is an offer review date scheduled or not, when you see a home you are interested in buying, I recommend we look at it ASAP since the good ones usually go quickly. We may want to make an offer quickly to try to avoid competition. Let’s talk about your options and all the expertise and strategies I have to share with you!
Call, text, or email me today! Thanks,
Jennifer Suemnicht - Jen's Realty - RE/MAX Metro Realty, Inc.
www.JensRealty.com / 206-550-1676 / jen@jensrealty.com
