By Mainstreet Organization of Realtors
It’s no secret that there are currently more prospective buyers than there are homes for sale in the Chicagoland area. As a Realtor — even if you’re just breaking into the business — you’ve likely been hearing the phrases “seller’s market” and “shortage of inventory” thrown around often. These trends can drastically affect both buyer and seller expectations and, in turn, your relationships with your clients.
The current state of the market presents challenges for new agents when working with buyers, but with the right data and approach you can be a valuable guide to house hunters as they navigate this seller’s market.
What shortage of inventory means for the market as a whole
As you know, a shortage of inventory means there are fewer homes on the market than there are prospective buyers. The impact of a seller’s market on home sales is clear. Consider this: from January 2015 to 2018, the median sale price of a home in Naperville went up nearly $20,000, according to Lynn Madison, a director and past president of the Mainstreet Organization of Realtors and owner of Lynn Madison Seminars, through which she provides training for Realtors. Further, in our current market, many Chicagoland homes are selling for 98 or 99 percent of their list prices as opposed to the 92 or 95 percent of list prices that was common a few years ago. The amount of time homes in the area stay on the market has also dropped.
Higher prices and faster sales pose challenges for house hunters who are looking to buy a home in the next few months. Reasonably priced options are flying off the market, and buyers simply must act quickly and intentionally to land their dream home. To get an ideal home within their budget, buyers should be willing to close at or above a home’s asking price.
A careful balance exists between buyers and sellers: If no one sells, no one can buy. The limited selection can sometimes be disappointing for clients, and they may try to hold off on making an offer until more houses come on the market. But if too many buyers work with this mentality, they inadvertently add fuel to the flame in a shortage.
How to navigate times of low inventory with buyers
As a Realtor, your clients look to you for your expertise. However, many buyers also look to estimates from online sources, which tend to undervalue homes. Or, they may have last bought a home during a buyer’s market, when sellers had fewer options. These factors can lead them to expect to be able to place lower offers than are realistic in the current market, and lose out to other buyers.
If a buyer attempts to make too low of an offer and misses out on their dream home, they can become discouraged. It’s a vicious cycle that, when not navigated with a deft hand, can create challenges for any Realtor, particularly new ones. When an offer on an ideal home doesn’t go as planned, experienced Realtors tend to have an edge because they know how to articulate the buying trends they’ve personally noticed and relay their own past clients’ stories.
While you may not have such stories to draw on as a new Realtor, you can use local data to explain to buyers what’s going on in the market and what they can expect. With access to the Multiple Listing Service (MLS), you can keep buyers informed of the most up-to-date listings and help them see homes when they first go on the market. Not all of your clients will be informed about these tools, so take the time to help them understand their options, the information you have access to and how it can help them.
Put all available properties in perspective for clients. They trust you and are consulting you for your guidance. Show your clients data that proves they should move quickly on the homes that interest them most. Educate them about how the home appraisal estimates they see online may not be an accurate indicator of a home’s real value. They should also keep in mind that if they’re planning to sell a home as well, they may be able to ask for more than they had originally anticipated. And most importantly, encourage buyers to jump on opportunities while they’re available because the best homes won’t stay on the market for long.
Remember, even if you’re operating in a seller’s market and there are a lot of buyers out there looking for a new home, you have to actively pursue clients. In fact, according to Madison, 54 percent of buyers hire a Realtor because they’re a friend, relative or a referral from a friend or relative. Other house hunters find Realtors through listings online, which can also put you at a disadvantage as an up-and-comer. Take advantage of social media and let everyone in your sphere of influence know you can help them on their house hunt. Or, take a course on how to better market yourself or your brokerage.
Once you reach potential clients and build your portfolio, you can leverage local data as well as your own experience to help buyers make a winning offer.