Tips for Buying a Home in a Low Inventory Market

Right now we are facing a low-inventory housing market where more people are looking to buy a home than there are homes for sale. This trend has been continuing for several years, creating an overall shortage in housing inventory. Construction of new homes was set back by the 2020 lockdowns and many families chose to stay in place instead of buying a home for the same reason.

However, now that travel restrictions have lifted, you may be burning to buy a house. Whether this is your first house or your fifteenth, buying a house in a low inventory market poses a unique challenge. Other buyers may quickly outbid you or homes may disappear from the market before you have a chance to complete your due diligence.

Fortunately for today’s buyers, there are several effective strategies to buy a house when the inventory is short. Let’s explore the top methods for buying a home in a low inventory market.

Know Your Must-Haves and Deal-Breakers

Write down your priorities to increase the speed of your home selection. This will allow you to decide ‘yes’ or ‘no’ on a property quickly.

When you’re reviewing features, flipping through the photo gallery, or taking a tour you want to identify good candidates and avoid wasting time on bad candidates. When a house passes your list of must-haves and doesn’t have a single ‘deal breaker’, be prepared to jump into bidding and negotiations before it’s off the market.

Get Your Loan Pre-Approved

When inventory is short, no one has time for a slow financial process. Having your mortgage ready to finalize is critical to competing with other bids. Pre-approval of your home loan assures a buyer that your bid is genuine, complete and that you could close on the house quickly if they chose your bid over others.

Make sure to start and complete the mortgage pre-approval process before you start making bids and buying a home.

Reduce Your Contingencies

Contingencies are protections or allowances you ask for in the contract during negotiations. A contingency might be that you won’t buy the house if it fails a structural inspection. Or you might ask for an extra month to schedule your move. Sellers can also ask for contingencies, but each contingency also acts as a bargaining chip spent.

The fewer contingencies you demand, though, the easier sellers will have to sell you a home. Indicate when you submit your bid that you will ask for fewer contingencies and motivated sellers might jump at the chance for a more favorable sales contract.

Consider Homes with DIY Potential

The homes most competed for are move-in ready, decorated, and staged to impress buyers. But look just below that level and you’ll find beautiful homes with a great deal of potential – if a little on the shabby side. If you’re handy or willing to invest in some home renovations after the purchase, you might find less competition for DIY project homes on the market just below the move-in ready frenzy.

Skip the Low Offer Phase

In a seller’s market, skip the low-ball strategy. A low bid is an invitation to the negotiation table, but only when you have the leverage to negotiate with. As a buyer in a seller’s market, use your bid to show respect for the house and start a genuine baseline for negotiations. Remember that higher bids win bidding wars while lower bids give you a lower negotiation price to start from. Don’t low-ball sellers who have other buyer options.

Write a Personal Letter to the Sellers

Sometimes if a seller is torn between similar bids, the personal touch can have a powerful impact. Write a letter to the seller of your favorite house. Express the feelings the house gives you and describe the future you see within its walls. Talk about why you think your family would be happy living there and why you’re so motivated to buy right now. Having this insight into the person behind the bid can often motivate a seller to choose a bid based on that pathos.

Seek Out Motivated Sellers

Finally, don’t be afraid to reach out to sellers who may be motivated to accept a bid. Even with a limited inventory, some homes have been on the market far longer than the seller prefers. Some homes, though valuable, have been waiting on the market for years. Look for homes in more removed areas or less popular neighborhoods. Look for buildings with maintenance problems you can handle and with sellers who are eager to sell quickly.

Simply by reaching out to and working with a motivated seller, you can quickly become their favored buyer and win yourself a slot in the limited housing market.

If you are buying a home in today’s limited inventory market, get your finances ready to act. When you make a bid, you’ll want to dive into escrow, negotiations, and closing the home as quickly as possible. Sellers also appreciate a buyer with their paperwork and priorities in order. For a consultation with a loan officer on your upcoming home purchase and finances, contact Atlantic Home Mortgage today.