3 Tips for Buying a Home in a Low-Inventory Market

Buying a home today is far from easy. Not only have mortgages gotten expensive, but a glaring lack of inventory is leaving buyers with few options.

As of late July, there was a 3.3-month supply of available homes on the U.S. market, according to the National Association of Realtors. For context, it can often take a six-month supply of homes to balance the housing market and satisfy buyer demand in full.

But while it may be challenging to find a home in a low-inventory market, that doesn't mean it can't be done. Here are three steps you can take to find a home when there are few properties to choose from.

1. Separate your must-haves from the features you merely want

If you're going to be taking on the expense of a mortgage payment, not to mention other costs like property taxes, then it's natural that you'd want a home that meets your needs and wants. But given the lack of inventory today, a better bet may be to whittle down your list of must-haves and focus on those rather than go after every single feature you'd like your home to have.

For example, if you have multiple children and you work from home, you might need a minimum of four bedrooms to accommodate all of that. Meanwhile, you might want an updated kitchen. But remember, a kitchen is something you can renovate down the road. You can't easily build extra bedrooms if the square footage just isn't there.

Focus on the things you absolutely have to have in a home, and be willing to forgo some features or remodel your way into them over time as money allows.

2. Have a strategy for a bidding war

Given the state of the U.S. housing market, it's somewhat likely that you'll end up having to duke it out with another buyer, or set of buyers, over the same home. But it's important to go in with a strategy in that situation.

You may, for example, want to make your second offer a lot higher than your first to scare competing buyers away. So if the home you're trying to buy is listed for $500,000 and you're initially outbid with an offer of $510,000, you may want to go to $550,000 on your next bid.

Chances are, if the bidding war continues, the price will reach that point anyway. This way, you're controlling the bidding and potentially scaring your competition off so the price doesn't rise even higher.

It's also important to come up with a maximum offer you're willing to make. If you know you can't afford to spend more than $565,000 on a home, that has to be the highest you'll go.

3. Team up with a well-connected, seasoned real estate agent

As a buyer, there's no cost to you to work with a real estate agent. So you might as well find one who's experienced and well-connected in the neighborhood you're looking at.

With the right agent, you might learn about new listings as soon as they hit the market. You might even get hooked up with pre-market listings so you can scope them out before other buyers get a look. And the more available properties you get access to, the greater the chances of finding one you're interested in buying.

It's not easy being a buyer in today's real estate market. But if you follow these tips, you might manage to find a great home despite inventory being so low.