Inventory is Low, Opportunity is High

When a real estate agent hears the term “low inventory” these days, 9 times out of 10 you’ll see them make a face like they’ve just been told they’re about to receive a mandatory colonic. (Quite often, that tenth person really enjoys colonics, so it’s sort of hard to gauge how they feel about . . . all that.) We’ve reached sort of a weird spot in the housing market right now: house values are on the rise, the economy is displaying signs of good health, interest rates are still really good, down-payment-assistance options are more abundant, and yet the availability of houses is relatively scarce. THIS is where we separate the GREAT agents from the good ones!

If the local housing market were represented by a pie, let’s keep it simple and cut it up into four pieces: great homes, good homes, bad homes, and worse homes. Because inventory is so low, the first two slices – great and good homes – are getting gobbled up, if you will, straight out of the oven. As the pie sits on the counter, there are some who are taking a bite here and there at the third slice – the bad homes. All of that is leaving about 40% of the pie on the table – and this is not only where we see the great agents separating themselves from the good ones, this is also where buyers are able to get a little more house for their money (even in a seller’s market).

In a market like this, you’re going to be walking into homes with less-than-ideal elements. Just to name a few things: you’re going to find a living room where the carpet has been pulled up, pealing paint on a gutter or fascia board, and outlets with exposed wires. Obviously, these are issues that can be fixed and used as leverage for negotiation – there’s nothing earth shattering about that, right? But it’s how the agent handles the situation once the negotiation is completed and the house is under contract that REALLY matters.

Using FHA appraisal inspection requirements as guidelines, the GREAT agent knows that the appraisal is what can really mess things up and either delay the deal or completely derail it but will take the next logical steps to ensure it doesn’t. In the case of the missing carpet, the agent is going to get with the seller’s agent and say, basically, “Look, we’re perfectly fine with the bare floor. My clients are planning on putting in new carpet, but you and I know it’s not going to fly with the appraiser. Please have your client go down to True Value or Home Depot and get ANY color paint – the cheaper the better – and paint the concrete. It doesn’t have to be pretty. They just need to make sure there are no bare spots.” Same thing goes for pealing paint: scrap off the flakes and paint over the bare spot. As for the outlets, a GREAT agent is going to have a couple of plate covers (it doesn’t matter what color or style they may be) in her/his car and a screwdriver handy to slap one on when it’s called for. None of these suggestions is designed to “trick” the appraiser – she/he is given specific instructions on what will and will not pass, that is all. And no one is being unethical because all parties, during the negotiation of the purchase, knew about the bare floors, the pealing fascia board, and the uncovered outlets. The GREAT agent is just making sure that close of escrow isn’t blown by someone who gets paid regardless of whether the home sells or not (and may or may not care what happens in the transaction).

While there are no signs that inventory is magically going to appear tomorrow, a GREAT mortgage company is prepared with options/products that both agents and buyers WILL and SHOULD want to know about. We’re offering classes now, but we don’t offer colonics – at least 90% of you will be happy!