Here's Another Reason Why Buyers May Be Struggling to Purchase Homes

by Maurie Backman | Updated July 19, 2021 - First published on June 29, 2021

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It's a tight housing market -- and buyers may have more competition than they expect.

Buyers are facing their share of challenges in today's housing market, despite mortgage rates being really low. The reason? A glaring lack of inventory is causing home values to soar. Limited inventory means more buyers compete for the same properties, and that's causing a lot of bidding wars.

But buyers today aren't just competing with one another for the limited stock of homes for sale. They're also competing with investors -- people who buy homes not to live in, but to rent out or flip and sell at a higher price.

In fact, investors bought the largest share of lower-priced homes on the market during 2021's first quarter -- roughly 1 out of every 5 low-priced properties was purchased by an investor as opposed to a regular buyer. And that's making a tight market even tougher for the average buyer to succeed in.

Why are investors biting?

Investors are buying homes for the same reason regular buyers are eager to purchase them -- mortgage rates are near historic lows, and that won't last forever. Some investors pay for homes in cash, so they don't necessarily need to chase low mortgage rates. But for others, financing is key, so they, like regular buyers, want to capitalize on today's rates before it's too late.

How to navigate a tight housing market

Buying a home today can be frustrating. This especially applies to buyers on a budget seeking out starter homes, since there's an especially limited number of lower-priced properties on the market.

But there are a few things you can do to give yourself an edge as a buyer. First, if it's possible, make a cash offer. This isn't possible for a lot of us, but if you happen to have enough money on hand to buy a home outright, it's a tactic worth trying.

Cash offers tend to appeal to sellers because they don't have to worry about mortgages falling through. Cash deals can also close quickly, whereas sales that hinge on mortgages could easily take 60 days to be finalized. Remember, if you pay for a home in cash, you can always get a mortgage on it after the fact -- you don't need to deplete your savings and leave things at that.

If paying cash isn't an option for you -- and that's the norm for most of us -- then being super flexible with your closing date could help you get an offer accepted. A seller, for example, may want to go under contract on a home, but finalize that deal four months later. If you're amenable to this type of arrangement, it could give you an advantage over other buyers, including investors, who want to move more quickly.

Today's housing market has enough competition without bringing real estate investors into the mix. But since investors have every right to go after the limited supply of homes that's available, your best bet is to do what you can to edge them out. In addition to the tactics above, try appealing to sellers when you make an offer. Tell a seller how in love you are with his or her home, and how you can picture your family living there. You never know when a seller might purposely go with a regular buyer rather than letting his or her home fall into the hands of someone who only wants it for profit.

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