How to Survive a Market that has Low Inventory

It’s getting harder to find new homes on market. Inventory is tight and bidding wards abound us. Be that as it may, there are a few strategies to better your odds.

1. Offer a higher price – within reason: Prices rise when inventory is low and demand is high. Offering a higher price can be precarious when you’re purchasing a home. You’ll have to ensure you can bear — and get — a larger home loan. However, if the house doesn’t appraise, what then? Most lenders will not give a home loan for more than the assessed value. Be prepared to offer the difference between a low appraisal and purchase price with your higher offer (called an appraisal gap). I’ve found it’s more important to have a strong appraisal gap waiver than it is to have the highest price. Usually $10,000-$40,000 is what I see in offers these days. One trick is if you can put more than the minimum down payment, then you can afford to do an appraisal gap. Simply find the difference between your max down payment and the minimum and that is what you could fill, should an appraisal come in low.
2. Act fast, yet be persistent: In a serious market, the motto is often “Hurry up, to wait”.  Be prepared on a moments notice to make an offer quick. However, be ready to wait for the seller’s response. First offers in are often treated kindly so it’s worth acting fast. If your agent is good, they will keep checking in with the listing agent to make sure you are still competitive. It will likely take 5+ offers to get an offer to stick. When 20 offers are on most houses, that’s those are pretty good odds.
3. Be flexible on closing dates: Other than being quick on the offer, you may have to close rapidly as well. Sometimes the seller want’s a quick closing date. Find a lender who can do a 21 day closing. Sometimes the seller wants time to find a new home. Be ready to offer a delay in closing if that’s what the seller needs.
4. Rent the home back to the sellers: In a strong seller’s market, sellers could wind up destitute if their home sells before they have another home to move into. On the off chance that you can defer your own move in, offer to lease the house back to the sellers for a brief timeframe (less than 60 days for any owner occupied loan). This may give the seller the flexibility they need to find another home — and a serious edge for you.
5. Compose an extraordinary offer letter: Numerous sellers, particularly the individuals who intend to stay in contact with their neighbors, care about who will purchase their home. So make a letter clarifying who you are and why you love the house and neighborhood.