California has been in the middle of a housing shortage for years now, and there doesn’t seem to be a light at the end of the tunnel as far as beefing up inventory anytime soon to adequately meet demand. When sellers have the upper hand in a situation like this, buyers can be left feeling frustrated and empty-handed.
Having said that, there are still ways to navigate the current inventory shortage and come out on top. It might involve a little creativity and some unconventional approaches, but perhaps that’s exactly what buyers need to start doing in order to land the perfect home at the height of low inventory.
Check Out Expired Listings
The traditional method of house hunting obviously involves scoping out current listings on the market. But considering the slim pickings that California buyers are currently stuck with, it’s worth going the unconventional route when it comes to looking for a home to buy, and part of that involves checking out expired listings. Get your real estate agent to look at homes that were previously listed on the MLS, but never sold.
There could be a host of different reasons why these listings never made it to closing, one of which is being overpriced. Perhaps the owner had clouded judgment about how much the property was perceived to be worth versus what the actual market dictated. There’s no harm in contacting the owner of expired listings and finding out if there’s still a possibility that they would be open to making a deal.
Look at Rental Listings
In addition to expired listings, consider taking a look at listings that are for lease. Many rental units are obviously owned by investors who use these properties as a means of rental income. However, there are other homes out there that are being rented out by their owners as a second choice to selling.
For instance, perhaps an owner was called out on a last-minute job offer out-of-state that didn’t leave much time to sell, or that would only involve a temporary transfer. Or maybe a major life change occurred, such as a divorce or a lost job.
Rather than rushing into selling at that time, the owners may have decided to put the place up for rent instead and would try selling at a later time when the market is in their favor or when they’re better able to dedicate the time and their finances to selling. Have your agent call up owners of rental listings and see if they are open to selling. If you put an attractive offer on the table, they just might be open to the possibility.
Consider Offering Over the Asking Price
The law of supply and demand dictates that when supply is low and demand is high, prices will rise. It’s inevitable. If you put in an offer on a home, go in with your best foot forward and the highest amount that you’re willing and able to pay. Real estate has always been a game of negotiations, but when inventory is tight, now’s not the time to throw in a low offer in hopes of going back and forth with the seller and getting a price that’s well under the asking price.
Go in with your best offer right off the bat, and consider offering a little more than asking – within reason. You obviously need to take the necessary steps to make sure you’re financially comfortable with a bigger mortgage and are able to get approved for it.
You also want to offer a price that is still within range of what the market dictates. If you pay too much for a home, you could risk getting a low appraisal, which not only means you overpaid, it also means that your lender may not approve your home loan. Otherwise, you will have to come up with the extra cash to make up for the difference between the price you agreed to pay and the actual market value of the home.
You can also consider offering a heftier deposit. Instead of putting down the standard 1% to 3% of the purchase price, for instance, think about offering as much as 5%. This will show the seller that you’re serious about the home and love it enough to be willing to put more money on the table upfront.
Draft a Sincere Offer Letter
Sellers are not just selling a structure, they’re selling a home that they love and have built memories in. They might also still care about the neighbors that they are leaving behind and want to ensure the family that moves in is one that will be respectful of the home and the surrounding neighborhood.
Writing a letter explaining how much you love the home and how it would make the perfect fit for your family can go a long way at impressing sellers. They’re obviously emotionally connected to their homes and will appreciate knowing that you’ve developed an emotional tie to the home as well.
Some homeowners might not even be in the market to sell. But receiving a letter about the potential to sell at a very handsome price point might be just enough to encourage them to at least consider selling. A well-crafted love letter can be just enough to get the ball rolling.
Be Ready to Pounce
When the market is short on inventory and listings are snatched up just as fast as they pop up, you need to be on the sidelines ready to jump into the game. That means getting all of your ducks in a row, including getting your finances in order, getting pre-approved for a mortgage, finding a real estate agent, and prepping your current home (if you’re already a homeowner) to be listed.
In a hot market, you need to be ready to make an offer on a new listing that comes up. Just make sure that the decision you make is not made in haste; you don’t want to become the victim of ‘buyer’s remorse.’
The Bottom Line
Your real estate agent really is your best friend when it comes to working in a seller’s market with limited inventory. These professionals will help you get yourself ready for the market, and will pull out all the stops in order to find you a home that meets all your criteria, and is realistically within reach for you to purchase.