Despite escalating prices, available homes in popular neighborhoods have been “flying off the market” in recent months, according to the National Association of Realtors (realtor.org).
Lawrence Yun, the association’s chief economist, blames the “pitiful” shortage of available homes on a serious imbalance between the supply of properties and demand for homeownership.
“The glaring need for more new home construction is creating an affordability crisis that needs to be addressed by policy officials and local governments,” Yun says.
So, what are wannabe purchasers to do if they’re seeking to buy in a tight-inventory market? Fred Meyer, a consumer advocate and real estate broker, recommends they consider homes that have languished for longer than the typical selling time.
More than 80 percent of the time the only reason houses sit unsold for a lengthy period is because they’re overpriced, says Meyer, who heads a firm selling homes around Harvard University.
He says that in some cases, buyers can convince the owners of an overpriced house to negotiate a lower price through a thoughtful and well-reasoned letter.
“First, tell the sellers all the things you like about their property. Then, also include listings for comparable homes that have sold recently for market value,” says Meyer, a certified real estate appraiser.
Sid Davis, a real estate broker and the author of “A Survival Guide for Buying a Home,” says savvy buyers realize that some “shopworn” properties represent opportunities. This is especially likely if they’re dealing with sellers who must move.
“The longer a house is on the market, the less it sells for. That’s one of the tenets of real estate,” Davis says.
Here are a few pointers for buyers:
-- Familiarize yourself with property values in your area.
To navigate a seller’s market with confidence, Davis says buyers need to educate themselves on property values in the area where they’re searching.
Very often, the owners of a stale property that was overpriced from the beginning will ratchet down the price in incremental drops. The key for a prospective bidder is to know when the sellers are approaching a realistic price point.
“You and your agent need to do a thorough analysis of the market so you’ll have a good feel for the true value of any house you like. That way, you won’t be flying blind when you venture a bid,” Davis says.
The key to determining market value is to examine closely the data on recently closed home sales on similar properties -- known as “comparables,” or "comps."
“Make sure your agent shows you very recent comps that are really similar to the house you want to buy,” Davis says.
The more knowledgeable you are, the less likely you’ll be to overpay.
“When deciding how much to bid on a stale listing, don’t focus on the list price. Instead, orient your offer to what the market is really paying for that kind of house in that neighborhood,” Davis says.
-- Ask your agent to put you on alert to price reductions.
Stephen Israel, a real estate broker affiliated with the National Association of Exclusive Buyer Agents (naeba.org), suggests you track an overpriced property closely, waiting for the owners to take a price cut that brings it closer to its true market value.
To stay alert to potential pricing changes for the property of your choice, Israel recommends you ask your real estate agent to keep you constantly updated by email or text.
“Ideally, you should be kept informed on a daily basis,” Israel says.
Also, you can sign up for automatic email alerts from a real estate data company such as Trulia.
-- Present sellers with an offer they’ll find especially appealing.
Gregg Busch, the vice president of a mortgage lending firm, urges buyers to present the sellers of a stale property with a bid that addresses their need for a sure and urgent sale.
“To get the best possible price, you need the strongest possible offer, which shows that you could really go through with your proposed deal,” Busch says.
How can you make your bid stand out from others the sellers may receive? One way is to obtain a convincing letter of “pre-approval” from your mortgage lender.
Also, he recommends you propose a quick closing date in your offer. That should make your bid especially appealing to the owners of a stale property, particularly one that’s gone vacant after its owners moved away. Remember that even sellers who’ve paid off their mortgages and left town must meet their utility and upkeep costs, along with tax bills.
-- Offer a timeline in sync with the sellers’ preferences.
Are you focused on a particular property whose owners have finally taken a major price reduction after the place has lingered on the market for a long time? In that case, you may be tempted to come in right away with a low bid.
But Israel says it’s often wise to wait at least one or two weeks before venturing your bid on a stale property. That’s because typical sellers will wait a while after cutting their price before entertaining an offer.
“Of course, there are always exceptions. If you’re really in love with the house and think the sellers are finally realistic on price, don’t wait any longer. Bid right after the price drop or you could risk losing your dream house to another offer,” Israel says.
(To contact Ellen James Martin, email her at email@example.com.)