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Homebuying & Selling
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3 min read
The real estate industry is constantly changing and adjusting to market conditions. Inventory is one of the main factors for both homebuyers and sellers to consider. The amount of available housing inventory will determine how competitive or expensive the market is.
Here’s a snapshot of the current state of housing availability in America for households earning $75,000-$100,000:
- There are over 400,000 fewer affordable homes available for sale compared to the start of the pandemic.
- There is only one affordable listing available for every 65 households, a significant drop in availability from one affordable listing for every 24 households in 2019.
- Housing inventory is only expected to grow 3% on average in 2022, rebounding from 2021 lows, but remains very limited.
A low inventory housing market is usually favorable for sellers and can be intimidating for homebuyers to navigate. Given the current high demand and increasing scarcity of available homes, you may be worried you’ll never even find your dream home, much less submit the winning offer on it.
Fortunately, the spark of passion and drive that accompanies the desire to be a homeowner is hard to extinguish. If you’re ready to make that move (literally), don’t let low housing inventory dim your enthusiasm for finding and buying the perfect home. Follow our tips for getting your offer accepted in today’s competitive sellers’ market.
1. Lead with your best offer.
If you’ve identified the house you want to purchase, put your best foot forward by offering your highest price and most flexible terms right off the bat to decrease the likelihood of being outbid.
2. Show sellers you’re committed by submitting a due diligence deposit.
A due diligence deposit is a fee homebuyers can submit when they make an offer on a home. During the due diligence period of inspections and approvals, paying this fee will prompt the seller to pull their home off the market while the paperwork is completed.
3. Get pre-approved for financing.
When you’re shopping for a home in a low inventory market, you want to show the sellers you’re both interested in their home and able to purchase it in a timely manner. Getting pre-approved for mortgage financing will show sellers you’re ready to do business.
4. Be flexible about move-in dates.
Selling a home involves just as much hassle and interruption to daily life as buying one does. A seller who feels pushed out of their home before they are ready could jeopardize the home sale. Be sure to allow the seller plenty of transition time to move. Offering a lease-back is also a way to close quickly but give the sellers time to transition.
5. Offer to include an appraisal gap.
When homes appreciate faster than expected, as in 2021, an appraiser may value a home for less than its contract price. The low appraised value can cause a deal to fall apart entirely.
An appraisal gap indicates that the buyer has and is willing to pay the extra funds to make up the difference between the appraised value and contract price. In some circumstances, it won’t be necessary to bring extra funds.
Motivated buyers may want to consider offering an appraisal gap to fill in the difference between the appraised value and the contract price.
6. Up your down payment.
The amount of your down payment is seen as a sign of financial strength. This is because buyers with more cash in the bank have more money to access if an issue arises when an appraisal comes in lower than the agreed price or when repair costs are higher than expected. Increasing your down payment will usually make you a more appealing buyer.
7. Have a reputable lender pre-underwrite your loan.
The underwriting process can sometimes expose undisclosed negative financial details about a homebuyer. Pre-underwriting a loan is the best method to alleviate these concerns. You can choose to have your loan pre-underwritten by a reputable lender, which will indicate to the seller that your financials have been thoroughly vetted.
If you're feeling stressed out over the homebuying process, then take a deep breath! Remember, you're making an exciting investment for your future and your family, and all of the hassle will soon pay off.
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