Navigating a Low Inventory Housing Market

Even in an ideal market, finding the right home and getting an offer accepted can be a challenge for homebuyers. When inventory is low, it becomes even more crucial to have the right professionals by your side to ensure you have an effective strategy and understand how to compete in a tight market.

What affects home inventory levels?

There are many factors that influence home inventory levels. Economic conditions such as interest rates, market conditions such as home values and rental prices, new construction rates, demographic trends, seasonality, location and more. By keeping an eye on these variables, you can better understand the factors influencing home inventory in your area and make more informed decisions in the real estate market.

Preparing to buy a home during a period of low inventory

While preparation is always key to a successful start to your home buying journey, it is even more critical during a period of low housing inventory. Being able to act fast and make a strong offer will make a big difference in a market where homes are selling quickly and sellers are often receiving multiple offers.

The first step buyers should take is to get pre-approved for a mortgage. Getting pre-approved for a mortgage shows sellers that you are serious and ready to buy. It also allows you to make an offer quickly when you find a home you love. When you work with a Summit Loan Officer, they will help you prepare financially for your home purchase by determining how much home you can afford and what loan programs are the best match for your unique circumstances.

Talk to your Summit Loan Officer about Summit’s Sellers Choice Guarantee, a program designed to help qualified buyers get their offer to the top of the pile.

The importance of working with local experts

While working with a local lender and real estate agent may not always be the cheapest option available, doing so can be a major benefit to homebuyers. Having a Loan Officer and Real Estate Agent with local market knowledge is incredibly important, especially during a period of low inventory, because they know how to successfully compete in your market. Local mortgage and real estate professionals can leverage their local market expertise, established relationships with other local professionals, understanding of local communities and market-specific negotiation skills to provide a more efficient and personalized home buying experience.

Making strong real estate offers

By finding local experts to assist you in the homebuying process and securing a mortgage pre-approval, you’re well on your way to making competitive real estate offers. Here are some additional strategies to help you craft a compelling offer and increase your chances of securing your dream home in a competitive market:

• Limit contingencies: Offer contingencies refer to specific actions or items in a contract that must occur for the contract to become legally binding. Contingencies such as home sale, appraisal and inspection present risk to the seller, so they are often looked upon unfavorably in multiple-offer scenarios.

While some contingencies are unavoidable, waiving non-essential contingencies or shortening contingency periods can make your offer more compelling to sellers. Your Real Estate Agent and Loan Officer can offer specific guidance based on your unique situation.

• Increase your earnest money deposit: Earnest money is a deposit made to the seller of a home before closing on a house to demonstrate the buyers interest and intent to purchase the property. Sometimes referred to as a “good faith deposit”, earnest money is typically held in escrow during the mortgage process and applied towards the buyer’s closing costs and/or down payment upon loan closing.While a typical earnest money deposit is 1-2% of the home’s purchase price, making a larger deposit can further indicate your interest and commitment to the purchase and reassure sellers that you are less likely to back out of the deal.

• Flexible closing dates: Your real estate agent can speak with the seller’s agent to get a sense of their timeline. Sometimes sellers prefer a quick closing or need more time to move out. Accommodating the seller’s timeline by adjusting the closing date on your offer or offering a rent-back option can help make your offer stand out.

• Write a personal letter: Connecting emotionally with a seller can give you a leg-up on the competition. A heartfelt letter to the seller explaining why you love the home and how it fits your family’s needs can help create that emotional connection and make your offer stand out.

• Offer to pay the closing costs: While not everyone can afford to do so, offering to pay some or all of the closing costs can make your offer more appealing and sweeten the deal for the seller by maximizing their proceeds on the sale.

Competing and winning in a low-inventory market can be challenging, but with the right strategies and support, you can successfully find and secure your dream home. Understanding the factors that influence home inventory levels and working with local professionals to diligently prepare for the home buying process can give you a competitive edge.

Ready to start your home buying journey? Find a Loan Officer today!