Trends and Strategies for a Low Inventory Market
By Datta Khalsa, Broker
The year-end housing supply and sales statistics are in from our local MLS are in for Santa Cruz County, where the median Single Family home cost $1,200,000 in December and sold in 12 days for 104% of the list price, based on 133 sales for the month.
Inventory decreased by 50% from November, down 59% year over year with 94 homes available, compared to 227 homes last year. And average Days on Market remained low at 31 days. The number of new listings for the month of December decreased by 49% from November and is down 55% from December of last year, and Closed sales decreased by 18% from November from 162 to 133 homes sold. This is down by 22% from December 2020. In these conditions it has never been more imperative to make sure you have a sound strategy for the scenarios of multiple offers and overbids.
Some Buyers take the approach of not aligning with a buyer’s agent, choosing instead to surf Zillow and Redfin and tracking down the listing agents directly in hopes that they will give them an inside edge their offer preference over competing buyers. I have seen cases where this tactic succeeded when a buyer found an agent willing to bend the rules for personal benefit. However, the tactic isn’t as effective as some may expect, because it relies on conduct that would be contrary to the agent’s duty of being fair to all parties, and that is a line that most agents aren’t willing to cross.
One of the downfalls of this tactic is that in the buyer gets who they get with the listing agent, instead of being able to freely select their own representative based on their levels of compatibility, empathy, knowledge and skill, factors which often have considerable impact on the overall experience and outcome of the transaction.
I will generally advise a direct buyer that while I am happy to represent them, we will have someone else in my office collect the competing bids in order to avoid gaining insight of where the prices are coming in, and will write the offer based on my research of comparable recent sales and the general knowledge of how many competing offers they are up against.
Another downfall of this tactic is that a buyer who limits their search to the big consumer sites misses out on the considerable numbers of coming-soon “Members Only” listings that are exclusively available to agents, and their clients who subscribe through them, to receive updates directly from the MLS. In fact, an increasing number of homes are being snapped up before they even hit the open market by alert agents and their clients who proactively approach these listings.
Preemptive offers often move the review date up, but a mindful listing agent will usually notify anyone who has downloaded disclosures of the change to make sure all interested parties have a fair chance to participate. And while some agents take the policy of holding a single round of highest and best bidding, most will take the extra step to issue a multiple counter offer to the strongest offers to enable a second chance for refining their terms.
This generally will get their seller the optimum price and terms while also helping to level the playing field for participating buyers, which helps minimize resentment levels and bring closure for the parties who don’t get the place. After all, at the end of the day everyone has to live with the result, and the ultimate goal is a clear conscience and no regrets.