A low-inventory market with few options creates challenges—here’s how to give yourself space to operate
By Megan Craig
It’s undeniable: Markets across the country are tighter than they’ve been in a long time for those looking to buy a new home, particularly for first-time homebuyers.
According to the Realtor.com 2018 National Housing Forecast report, a low inventory of homes—especially affordable homes—in the market have made it hard for buyers to get traction. But all hope is not lost: The forecast calls for at least a slight easing late this year. While you wait for the market to loosen up, there are several ways to power through without trading in your REALTOR® status for another career:
1. Find sellers who didn’t know they wanted to sell
If you’re cooling your heels waiting for the right listing for your client, try an alternative: Go to a title company, find homes that meet your buyer’s criteria and do some good old-fashioned door-knocking to find out how interested the current homeowner might be in selling, says Pat Miller, CRS, a Broker Associate with Century 21 NorthBay Alliance in Rohnert Park, California.
A Strong You for a Tough Market
In a particularly tight market, buyers may become disheartened and need a lot of encouragement. The best REALTORS® are coaches, too. But you can’t be a coach for your buyers if you aren’t taking care of yourself, says Katherine Waters-Clark, a buyer’s agent with Compass Boston. Her strategy? She focuses on nutrition and exercise when the going gets tough in the professional world.
“This is a marathon way more than a sprint, so pace and sustainability are key. Packing nutritious food and water for your work day helps ensure that you are well-nourished,” Waters-Clark says. “Consistent exercise is a great stress reducer and increases stamina and endurance.”
Waters-Clark spends time revisiting old leads, hunting through her database and being of service in the community and to her past and present clients in any way possible, while also balancing her healthy eating and exercise routine. She says that while it’s challenging to keep a positive attitude when you’re working harder with each buyer to write several offers before one is accepted, keeping active, positive and healthy keeps her attitude in check.
“This market will wear and tear on the buyer and the buyer’s agent,” she says. “I think it’s important to have a mindset of abundance instead of scarcity, of success rather than failure, especially when things are scarce. Fight the temptation to be afraid and buckle down instead.”
For example, Miller had a client who wanted a home with a swimming pool. Through the title company, she was able to run a search for every home in the area with a swimming pool, then talked a homeowner into doing a 24-hour listing. That listing turned into a sale when her client bought the home.
“You’d be surprised how often people tell you they’d been thinking about selling when you approach them with the idea,” Miller says. “There’s always something you can do. Don’t just sit back and wait for the market to get better.”
If you’re an experienced seller, she also suggests going through your list of past sales and reminding those past clients how much equity they have now and how much their home is really worth in the current market. Even if they hadn’t been thinking about selling, sharing the facts just may convince them to do so.
Another avenue? Rental properties, says Chuck Nichols, CRS, with Coldwell Banker Burnet in Eden Prairie, Minnesota. If you know an agent wasn’t able to sell a listing in a more flush time and instead had it converted to a rental, ask if their client would be interested in selling on a one-time showing basis. “That way you’re not competing with anyone, and you can almost have your own private market,” he says.
2. Set your buyers’ expectations
This market is brutal, and buyers will have to make concessions. Be up front with them right from the start, suggests Katherine Waters-Clark, a buyer’s agent with Compass Boston. REALTORS® should always educate their buyers about the current market and trends, and make sure the buyer is ready to compete in that kind of market, Waters-Clark says.
“Prepare your buyers for battle,” Waters-Clark says.
“Set their expectations for this competitive market. Buyers must be ready and willing to be aggressive. It’s painful up front, but all my buyers are prepared and resilient, and eventually end up in a home.”
3. Write the seller an offer they can’t refuse
Have your client create a personalized letter, along with a letter you create, and include it with any offers you submit, Chuck Nichols says. Stress all the positive attributes and assets of the client who is looking to buy the property, and make sure to include bits on why your client would be the most suitable homeowner for the house. A personalized phone call from the buyer’s loan officer adds a reassuring enhancement to the listing agent. All this may tip a seller your way over a slightly better offer.
When representing cash clients, Nichols also puts together escalation clauses. In some low-inventory markets, listing agents will call for the highest and best offer by a certain date given the high interest in the property. In that case, the buyer’s agent can write an initial price offer with an asterisk and include a clause stating the client is willing to pay, for example, $500 more than the highest offer, not to exceed whatever the buyer’s absolute maximum offer is. The listing agent has to show evidence that they had another offer come through that required the clause to go into effect, but it also makes that buyer more competitive in the situation, Nichols says.
“It’s frustrating for buyers because they lose hope, and that makes it hard to get them to write the next offer,” he says. “They feel like they’re paying too much, compromising too much, so you have to assure your clients they are making a sound decision that will positively affect their long-term use and enjoyment of the house in your offers.”
Are you an RRC member, but have not earned the CRS Designation? CRSs are recognized as the top agents in the industry. Don’t wait to earn your CRS. Learn more at CRS.com/designation.
Fighting Through a Bad Market? Create a New One
Why watch your buyer suffer through several rejected above-market offers when you could give them a dream home for less than market value? That’s what Rick Rosen, CRS, associate broker/owner of Fresh Start Homes, a “real estate investment center” in Rochester Hills, Michigan, decided to do.
He uses a set of simple steps to ensure his clients get great homes without the bidding wars:
1. Find a distressed property, often through a wholesaler, a bankruptcy situation or an estate sale. (Rosen uses an in-house acquisitions team to find properties.)
2. Send your construction manager to the site to see how much it would cost to renovate. The construction crew draws up a scope of work.
3. Show the property, along with the scope of work, to a potential homebuyer. At this time, the homebuyer can have a home inspection done to determine whether anything should be added to the scope of work.
4. Set up the buyer with a lender (in particular, encourage them to consider a Fannie Mae HomeStyle® Renovation mortgage, which allows the renovation to happen while the home is in escrow). A home inspector should inspect the home at this point, which will help the buyer after construction begins by allowing a second set of eyes to monitor the process.
5. After closing, construction begins based on the timeline in the scope of work. This generally starts with any necessary decluttering and demolition, followed by mechanical needs (heating and cooling, electrical, plumbing), then beautification. The homeowner can then walk through with the contractor and put together a final punch list of what needs to be done before the family moves in.
6. After a final walk-through by the home inspector, the homeowner takes possession of the now-perfect home.
The whole process generally takes four to eight weeks, Rosen says, depending on how much renovation work is required when the property is purchased. When it’s finished, the homebuyer will have a new home experience with this pre-owned home, including their choice of materials and colors.
