Recently I’ve been thinking about the so-called inventory insanity. By now those of us working in the real estate business know there is a significant, and impactful, housing shortage. It stems from a number of factors but knowing how to negotiate and bringing your experience to light is an important strategy for getting your buyers into a house they love. And I mean this… sometimes working with an agent who you know makes all the difference.
Putting Into Perspective
We first need to put this housing shortage into perspective. According to data from the National Association of Realtors, provided to Inman, it is projected that there were nearly 6.5 million existing home sales in 2021. That’s significantly higher than 5.64 sales in 2020 and 5.34 in 2019. So there are more homes being sold, but also more buyers. It’s about supply and demand. In a balanced market, we have about 4-6 months of inventory and right now we have less than 1 month… the struggle is real my friends.
There are three main reasons for the housing shortage. First, not enough people are putting their houses on the market and the lack of (or limited) builders building houses. Some futurists think that the inventory is proportionately down (vis-a-vis buyers) because of COVID. And while I think this is true to some extent, the lack of inventory has been an issue for years–ever since the downturn in 2008. Other reasons include seller fears about not finding a new place or wanting to capitalize on future price increases. And, again according to Inman, there is a kind of contentment for people in staying where they are.
The second reason for the housing shortage is the lack of or a limited number of builders building homes. This is due to a number of factors, including building supplies and cost, labor, and zoning issues. But, the contractors are catching up!
And the third fact is that interest rates are low. I think that these historically low rates play a large part in the craziness. People are able to afford more than they ever were in the past and it allows another group of people to actually get into the market. And therefore more people are able to buy than ever before.
Tactics to Negotiate
So where does this leave real estate professionals? Here are some tactics you might consider.
- Be competitive with your offers and assume there will be multiple offers from other buyers. I like to say that buyers should go in at a price that they’re okay with if they lose the property.
- Work with your buyer’s lender. Ask them to contact the selling agent to bolster the strength of your client’s position.
- Prepared the buyers to be read to close the gap if an appraisal comes in low and discuss with the lender.
- Build a strong and effective relationship with the selling agent. They can share a lot of pertinent information! I can’t tell you how often this impacts a sale. Call them, chat with them about your client, and develop a rapport.
Learn How to Negotiate with Wendy Gimpel
These are just some thoughts I’ve been mulling around and masterminding with my team at Keller Williams Premier Realty. Tell me what you think and then give me a call to go over your options in this real estate market.