If you keep tabs on your local real estate market, you may know that the current market is operating with low inventory. This means that there are not enough properties available to meet the current demand. In other words, there are more people looking for homes than there are homes available, making this market an aggressive seller’s market. It is important for real estate professionals to work diligently to ensure transactions are being done safely and correctly despite the fast-paced market conditions.
Low Inventory for Sellers
When sellers are listing their property during a time when the market is experiencing low inventory, they can expect to have multiple offers. This is, of course, assuming the property for sale is appropriately priced. Homes that are priced appropriately and competitively with comparable properties will follow the trend of other appropriately priced homes in their bracket. With high demand and low supply, sellers will generally have to choose a buyer among multiple offers. If you list your property and run into this situation, make sure you understand each offer and all additional information on the purchase agreement, such as contingencies, addendums, or amendments.
When you have a situation where there are multiple offers, you can generally conclude that the property will sell at or above the listing price, which is great news for sellers. This stems from increased competition among buyers that are all interested in the same property. If one can offer more than another, there is a higher chance their offer will be chosen.
Low Inventory for Sellers’ Agents
Seller’s agents have to be organized, efficient, and practice excellent communication skills when they are representing a seller in a competitive market such as this one. Most importantly, the property should be listed at the appropriate price to make sure it gets in front of the right buyers. An overpriced home won’t show up on the home search of its perfect audience. These homes generally end up staying on the market too long and sell below asking price. Emotion can play a big role in the price of a home, as sellers can sometimes turn the sentimental value of a home into their perceived value of the property. Remember, a buyer is viewing your home objectively and will be comparing it against other homes within their price range.
Low Inventory for Buyers
When you are buying in a market experiencing low supply, you will likely have to move fast when you find a home you love. Expect to pay at or above the asking price depending on how many offers yours is up against. When buying in a market with low inventory, the price of homes tends to increase as demand outweighs supply. Most people want to find a turn-key home, which means its almost the perfect home besides basic touch-ups like paint, window treatments, decor, etc. When we are in an aggressive sellers’ market like this one, many people who want to buy these kinds of homes get priced out, but that doesn’t mean they can’t move. Instead, try viewing homes in a lesser price range and consider the cost of home repairs/remodeling projects. You might be surprised by what your agent can find for you.
Since inventory is low, when new properties come available, they are often shown quickly and may receive offers shortly after listing. Be prepared to move quickly, but be conscious and firm in your boundaries. When you are competing with other buyers, you may feel pressure to offer more than you can afford. For example, Steve has been approved for a home loan of $300,000., but he knows that with his lifestyle and other responsibilities, he really can only pay the principal, interest, insurance, taxes, and utilities each month on a home that costs $275,000 or less. If Steve wants to put an offer on a home and there are multiple offers on the table and the seller submits a counteroffer for more money, he may feel inclined to offer more. Know and enforce your boundaries.
Low Inventory for Buyers’ Agents
Buyers’ agents have to write offers quickly and correctly in a market with low inventory. Purchase agreements should be well written and submitted as soon as possible when a buyer wants to make an offer. A buyer’s agent will have to be reachable, efficient, and responsible. Make sure showings, inspections, repairs, meetings, contracts and all other paperwork are coordinated and documented. When sellers or their agents send communication, the agent should relay information as soon as possible to their buyers and continue to educate and inform them of their options all throughout the transaction.
Buyers’ agents in competitive sellers’ markets must put effort into managing expectations. Many buyers may not understand that in a market like this, they will be needing to offer at or above asking price and that they have less negotiating power.