5 Tips to Buy a Home When Inventory is Low
Mortgage rates are at or near an all-time low, which has real estate investors and homebuyers racing to find the best deal on a new property. However, in addition to mortgage rates being at or near an all-time low, so is the current housing inventory in the United States.
Since real estate, like all other industries, relies so heavily on the laws of supply and demand, with low inventory it may seem like sellers are in the power position while buyers and investors are forced to overpay for properties. Fortunately, there are some ways that you can find a great deal on a home, even with the housing inventory at or near a record low.
Get Financing in Place Early
Depending on the amount of cash that you have on hand and the price of the home that you want to purchase, you may need to obtain financing from an outside source.
If you’re purchasing a home, this may include working with a Mortgage Loan Officer. If you’re an investor, this may involve a mortgage loan or raising funds from other investors who you want to bring into the deal.
However, you’re going to obtain financing to purchase the subject property, make sure that you have these funds in place early.
The process of obtaining a mortgage can take some time, and in a housing market with low inventory, you don’t want to be waiting for financing while someone who already has the necessary funds swoops in and purchases the home of your dreams.
Search For Old Listings
When houses have been on the market for an extended period of time, there’s a reason. In some cases, it’s because the sellers have overvalued the home and set the price point too high. In other situations, houses sit on the market for a long time because the property is outdated or in a state of disrepair.
When homes sit on the market, the sellers often become more motivated to finally sell them, meaning they may be willing to take less than their asking price for the property.
Homes that need some work generally cost less than those considered “move-in ready.” Don’t be afraid to take on a property that could be a fixer-upper, especially if you have the ability to do some (or all) of the work on your own.
In a limited housing market, finding a house that requires some work may be your best opportunity to get a great deal. Be aware that homes in complete disrepair may require work done prior to closing. A renovation loan may be needed. Talk to your Loan Officer for details prior to making an offer.
Don’t Get Desperate
As an investor or a home buyer, it’s easy to become so frustrated by the lack of available inventory that you allow desperation to creep in. All of a sudden, a home that you know is worth $200,000 under normal market conditions can be a tempting buy even though it’s listed at $275,000.
If you’re going to get the best deal on the home that you’re purchasing — if you’re going to succeed as an investor — it’s important that you find the balance between being patient and proactive.
While you need to jump at a good deal in a limited market, it’s crucial that you don’t become so focused on being proactive that you make a bad deal in the name of desperation.
Concessions Don’t Equal Losing
Finally, in order to make a deal happen in a limited housing market, you may have to make some concessions on the deal. However, don’t fall into the trap of assuming that conceding on a few points of the purchase offer equates to losing in the deal.
Remember, the sellers (and their real estate agents) probably already know that the current market favors them. With that information in mind, you may have to be willing to back down on some issues that you would generally be bullish on.
For instance, if the property needs a new HVAC system, you may have to accept that you will be financially responsible for installing that instead of making it the seller’s responsibility in your purchase offer.
Additionally, your concessions may include paying a little more than you wanted to. While that’s certainly not ideal, if you believe that the property is only going to increase in value, paying slightly more than expected upfront can still put you in a position for long-term success.
There is no question that the current real estate market favors sellers. That doesn’t mean that buyers and investors have to sit on the sidelines and wait for the market to shift. Instead, you should work with a company that can help you achieve your purchasing goals.
Summit Mortgage offers a technology-based approach to mortgages, designed to help expedite the process and put you in more control of your purchasing goals. Our process ensures that you aren’t sitting as a limited inventory of available houses fly off the market. Get started by filling out our Quick Start Form and we’ll connect you with a loan officer that matches your specific needs. They’ll provide a free consultation and guide you through every step of the loan application process.
Categories: Home Buying