9 Tips For Navigating Low Inventory Markets
Andrew Dehan4 minute-read
July 15, 2021
Steering home buyers through a competitive, low inventory market can be difficult. Even the most experienced real estate agent can have a hard time helping their clients through a tight housing market. From bidding wars to high asking prices, set expectations for your clients on what to expect in a hot market.
This is where we come in with information to help you find the right new home for your clients. Here we'll cover tips for you to find more home sellers, then talk about five tips for communicating with your home buying clients.
Let's get started.
In A Seller's Market, Find New Sellers Before They List
In a hot seller's market, you need to reach into your bag of tricks to connect your client to their dream home. When home sales are happening within hours of listing, knowing how to find listings before they hit the market can mean your client gets their bid in early.
There are a couple methods to finding properties before they list. The first is old-school: door-knocking. Visit a neighborhood your client is interested in and start knocking on doors. Lead by saying you have a buyer who badly wants to move into the neighborhood. Have a one-sheet flier to leave, so even if they don't answer, you might make a connection.
Another tactic is advertising you have a buyer for specific markets on Facebook. You can do this through updating your status, but for more traction, you may want to consider running ads.
Look For Expired Listings
Do some digging to find listings that were on the market but fell off. These could be properties that homeowners changed their minds on selling or didn't have enough interest in when they listed.
Look for expired listings with your MLS and contact these homeowners, explaining that the competitive market makes it a great time to reconsider selling their home.
Talk To Downsizers And Landlords
If you're having a hard time finding available properties in this low inventory market, you may need to sell people on the idea of selling. While you're researching the area your clients want to buy in, be on the lookout for people you can convince to sell.
Empty nesters and retirees, or even just people going through a life change, may be looking to downsize. Have your feelers out and make connections, telling them now's an incredible time to cash-in on their investment. Tell them you have qualified buyers ready and make a connection with them so they remember you when it's time to sell.
Rental property owners are another great source. Sell them on the benefit of liquidating their property while the market's hot. Communicate you have qualified prospective buyers and right now is an incredible time to take advantage of rising property values.
Convert Your Prospects Into Clients
Many home buyers are also home sellers. Go through old buyer's leads and follow up. You may find that some of the people a few months ago who said they were "just looking" are now ready to dip into the market. Promote the current market's low interest rates as a plus for buying.
If you can take old buyer's leads and convert them to clients, those buyers may also be looking to sell a home. If you do your job as a good buyer's agent, they could ask you to represent them as their seller's agent. Remind clients in this situation that home prices work both ways: they'll pay more for a new home but will get more for their current home.
5 Tips To Share With Your Buyers
Now that we've covered ways you can grow your home sales, here are some tips you can give your home buying clients on what to expect in a hot market.
Be Transparent About The Real Estate Market
You need to be upfront about what home buyers should expect in a seller's market. This is doubly true if your client is a first-time home buyer. They need to expect to be up against bidding wars, cash offers and higher prices.
Clients may be set on an idea of a dream home, and you may have to level with them. With the low housing inventory and higher prices, that dream home may not be within reach for them. If they have a very specific idea of what they want, let them know it could take time for that home to come on the market.
Gently discuss with your clients what they can expect with what they can afford. Work through their list of needs versus their wants. Find out absolute deal breakers and try to steer away from them. They may not be able to find their perfect home, but they may be able to find one they love.
Encourage Clients To Get A Verified Approval
A Verified Approval Letter (VAL) through Rocket Mortgage® can help your client’s offer stand above the rest. A VAL isn't just any preapproval. It shows the seller your client is ready to buy because it's backed by the buying power and expertise of Rocket Mortgage.
Using Rocket ProSM Insight, you can access your client's VAL at any time as well as the information on how much they're approved for.
Consider Escalation Clauses
To make a more competitive offer, talk to your client about adding an escalation clause to their bid. If they're outbid, an escalation clause will give an immediate response, laying out how much more they're willing to bid above competing offers.
A downside to an escalation clause, though, is that a seller may reject the bid, knowing that it's not the client's best offer.
Talk With Your Clients About Adding Extra Incentives
In a seller's market, there a few ways buyers can sweeten the deal. Offering more earnest money or making a bigger down payment shows the seller that the client is serious about buying and may help the bid stand out.
You could also talk with your client about waiving contingencies, such as an appraisal or home inspection contingency. This may give them an advantage on a home they're serious about. However, tell them how it can backfire. For instance, if the home appraises for the less than the accepted price, they'll have to cover the gap or lose their earnest money if they back out.
Understand Your Client
Some clients are more conservative with their spending than others. Be real with your client on what they can afford, but also know when to let them take risks. If they want to buy at the high end of their budget and waive contingencies, inform them of what this could mean for their finances, but also know that it's their decision to make.
Home searches are hard. The most important things you can do for you client is give them good advice, coach them and connect them with the best house they can get.
The Bottom Line: Focus On The Positives
Charting the waters of a limited inventory market is tough for any buyer's agent. You're really earning your commission. It may be a competitive market, but focus on the good. Mortgage rates are still low right now, things are better than they were last year and you're helping people find their next home.
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