Shannon Brien, broker-manager at The Douglas Realty Group in Cary, N.C., says their clients are at the mercy of ultra-low housing inventory. Building permits were down 20 percent year over year in March, according to a Wake County report, and bidding wars are on every corner in the Raleigh-Durham area. One of Brien’s clients recently had to compete with eight other offers on a home.
Indeed, many markets throughout the U.S. are experiencing the same scenario. While housing inventory nationally rose 9.8 percent month over month in April, with 1.8 million existing homes for sale, it’s still 6.3 percent lower than a year ago, according to the National Association of REALTORS® existing-home sales report release in May. Lawrence Yun, NAR’s chief economist, says staggeringly low inventory is the root cause of the 2.5 percent decrease in sales from March to April, which is the second straight month existing-home sales have fallen year over year.
When inventory is this low and demand still high, keeping your buyers optimistic and engaged can be a challenge, to say the least. Luckily, Brien and other brokers have learned how to prepare their clients for today’s market realities.
Find Great Partners and Have a Plan
Start by recommending mortgage lenders who will give your clients an edge. One of Brien’s favorite lenders, Southern Trust, is now preunderwriting all her team’s buyers so they are ready to close 21 days from contract. “It’s been a huge advantage,” she says. With the overall inventory of homes for sale down 12.3 percent year over year in April, her market is down to a 2.3 month supply at 7,609 homes, according to the Triangle MLS. So, prepping clients to move quickly once they find the home they love is key—as well as determining what concessions they’re willing to make. “We coach our buyers to present clean offers, no closing costs, no appliances, and to pay for their own home warranty,” Brien adds. But her team can usually get closing costs paid during their negotiations on repairs.
Also, a word of warning: “Never set foot in a showing with a buyer who’s only prequalified” for a mortgage, says Lou Nimkoff, broker-owner of Brio Real Estate Services and 2018 president of the Orlando Regional REALTOR® Association. Prequalification only looks at a mortgage applicant’s general financial picture, whereas preapproval requires a credit report analysis and an in-depth look at financial documentation to determine the specific mortgage amount the client is qualified for. Making sure your buyers have been preapproved is a necessity.
Think Outside the MLS
Bita Kamoei, co-owner of BBS Brokers Realty in Palm Desert, Calif., says expired listings may be worth looking into, especially if you have the perfect buyer. You could also look for opportunities in local rental listings, suggests Desare Kohn-Laski, broker-owner of Skye Louis Realty in Coconut Creek, Fla. Sometimes, all it takes is speaking to the owner and explaining why it’s a great time to sell. Then there’s the tried-and-true method of door knocking. “While door knocking can be scary, it is one of the most effective ways to speak with an owner,” Kohn-Laski says. Brien will mail postcards to neighborhoods where homes are moving quickly to try to catch sellers before they go on the market. She will also have her buyers write letters to sellers explaining why they’d like to purchase their home.
Another way to make connections with potential sellers on behalf of your buyers is to network at your local REALTOR® association, Brien says. At the least, it gives you the opportunity to meet the agents on the other side of the deal.
Pounding the pavement should be part of your agent’s repertoire, says Kohn-Laski, and this extends to social media. She understands that Facebook and Instagram can become low priority in a real estate professional’s life—especially when the market is hot—but she encourages her agents to think of it like the modern-day newspaper. “Viewers check their feed in the morning, at lunch time, and even while winding down after dinner,” she says. “A simple comment or like is sometimes all it takes to spark a valuable conversation.”
Make a Standout Offer
Cash is king, says Nimkoff, but flexibility with closing and move-out timing can go a long way. “A clean offer with the fewest demands and greatest concessions will likely float upward,” he says. It’s also beneficial to give the seller as much information as possible about the buyer’s situation, Nimkoff says, to reassure the seller of the buyer’s ability to close. “This practice is particularly helpful when the buyer’s offer is contingent on the sale of their current home,” he says. You could provide information about the buyer’s own home and the market conditions, including whether it’s already under contract, when it’s scheduled to close, and the strength of its buyers.
When making offers higher than the asking price, Brien says to always do your homework to see if it’s worth it for your buyers. Encourage your clients to have patience, Nimkoff says, because sometimes, it’s best to hold out for the home they really want. “Don’t let them settle for a home that doesn’t make them happy,” he says. “Of course, this also means that the agent has to be patient as well.” Thus, a lesson for broker-owners and managers to take to heart is teaching their agents patience in these low-inventory conditions.
Prep Your Sellers, Too
A seller’s market doesn’t automatically invite owners to price gouge. “Homes should be priced at a level that the market can reasonably bear, especially if the seller wants to be able to entertain purchase offers involving a mortgage,” Nimkoff says. And your seller clients shouldn’t rest on the laurels of a seller’s market, he says. “Even homes in a low-inventory market should be cleaned and prepped to show at their best.”
Kohn-Laski says once a home goes on the market, that listing needs to be available to show immediately “to ensure first dibs.” What’s more, your sellers need to have a backup plan in the likely scenario that their home will sell faster than they can find one to purchase. Brien has had to move several sellers into short-term housing after closing to avoid contingent offers. “Again, industry partners have saved the day by letting us work out three- to six-month leases at reasonable rates,” she says.