Low existing home inventory isn’t new housing market issue. Low mortgage rates and rising home values have made many real estate markets extremely competitive with homes selling above listing price within a matter of days. According to the most recent existing home sales report, inventory is at its lowest in nearly two decades. Here’s how you can prepare for buying a home when inventory is tight.
Get a Loan Commitment
Meeting with a lender should always be your first step when you decide to purchase a home, regardless of it being your first home or tenth. A pre-approval is the traditional route taken by homebuyers to convey to a seller that they are serious homebuyers. A loan commitment takes the pre-approval process a few steps further.
When prospective homes are limited and demand is high, a loan commitment stands out to sellers as financing with “cash offer power”. Loan commitments provide buyers with the ability to act quickly, gain peace of mind and present a sound purchase offer.
Determine Your All-In
In a competitive and limited market – aka, a seller’s market – it’s important to know what your top price is, especially when you think a seller won’t take much less than asking price. Whether your all-in is the maximum amount you’ve been pre-approved for or something less, agreeing on a maximum purchase price will help you feel at ease if it comes down to crunch time.
Hire a Knowledgeable Agent
A good real estate agent is a must even when inventory isn’t low, but when houses are coming on and going off the market within a matter of days, having an expert on your side is extremely beneficial.
A well-connected agent will know the ins and outs of what’s coming on the market, homes that didn’t sell (expired listings) and past clients who have been thinking about selling. Even if you keep coming up short on prospective listings when you do a web search, a great agent will think outside the box and may help you go forth with your home search in a less traditional way.
Looking for the right agent? See our tips on how to find one here.
Know Your Must-Haves and Good-to-Haves
When looking for a home, it’s important that you find an option with the majority of items on your want list. When options are tight and competition is fierce, you also need to determine what you can do without.
For instance, you may be willing to for-go a home with a smaller yard but you aren’t willing to have yourself, your spouse and three children living in a 3-bedroom home (even if it is in your preferred location and school district).
Be Flexible & Timely
Availability isn’t only on the shoulders of your real estate agent. Figuratively, time is of the essence in a housing market with limited supply, and if you’re anxious to purchase a home, you’ll need to be flexible with time you set aside for showings as well as be available to make fast decisions.
To learn more about the home buying process and the difference between pre-approvals and loan commitments, download our free Mortgage 101 Handbook below.