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4 Creative Ways to Work Around the Inventory Problem

Home Agents
By Marc D. Gould
August 1, 2017
Reading Time: 3 mins read
4 Creative Ways to Work Around the Inventory Problem

Young couple searching for an apartment

One of the most frustrating aspects of this year’s housing recovery is that solid demand from buyers has encountered stubbornly low inventory levels in many U.S. and Canadian markets, especially for starter homes. It’s a situation that requires both patience and creative solutions.

As a managing broker, your buyer’s reps may be tossing up their hands and asking, “What can I do?” To be sure, when the supply of homes is inadequate, buyers’ options are limited.

On the other hand, this may be an excellent time for your agents to explore options that aren’t on the buyer’s radar. At a minimum, buyer-clients will feel better about working with someone who keeps the dialogue going and remains interested in proposing potential solutions, including:

  1. Buy a fixer-upper. That run-down house that’s been sitting on the market for months may be a diamond in the rough for a buyer with the vision to see its potential, especially if they have the time and skills to participate in renovations. Before making an offer, however, encourage your agents to assist this buyer in estimating renovation costs and identifying people in the trades to assist them. Also, see if they qualify for and can take advantage of FHA’s 203(k) renovation loan.
  1. Buy a teardown and rebuild. If a buyer doesn’t want to deal with the potential headaches of a fixer-upper, they may be a good candidate for purchasing a teardown, or a vacant lot, and building a new home. Fortunately, there are many ways to accomplish this without the expense of hiring an architect or a custom home builder. Learn who is supplying prefabricated and modular homes to your market—options that aren’t only economical and energy-efficient, but also increasingly popular with younger buyers.
  1. Explore rent-to-own possibilities. One reason starter homes are so hard to find is because many move-up buyers are holding onto their original home, renting it to someone else or listing it on sites like Airbnb. Coupled with investor purchases during the housing slump, it’s no wonder inventories are pinched at certain price points. While national rent rates continue to inch up, some markets are already facing declines. This may be the perfect time to approach investor-owners with a rent-to-own proposal for your buyer-client.
  1. Buy a larger home with rentable space. If a buyer qualifies for a larger mortgage than they need (or want), it may make sense to go ahead and purchase a bigger property that includes a mother-in-law apartment or similar rentable space. That way, the buyer can offset part of their mortgage expense with rental income, while also building extra equity in their home. Additionally, if they start feeling crowded in their home, they may decide to take over the rental space, eliminating the need to search for a larger house, while also saving on transaction and moving expenses.

Admittedly, these solutions may be less than ideal for many buyers. Until the inventory situation improves, they’re examples of ways to put a positive spin on a challenging situation. After all, as the saying goes, “When life gives you lemons, make lemonade.”

Marc D. Gould is vice president, Business Specialties, for NAR and executive director of REBAC. A wholly-owned subsidiary of NAR, The Real Estate Buyer’s Agent Council (REBAC) is the world’s largest association of real estate professionals focusing specifically on representing the real estate buyer. With more than 30,000 active members, REBAC awards the Accredited Buyer’s Representative (ABR®) designation to REALTORS® who work directly with buyer-clients.

For more information, please visit REBAC.net.

For the latest real estate news and trends, bookmark RISMedia.com.

Tags: Buyer-ClientsFixer UpperHome-BuyingHousing InventoryIncome PropertyReal Estate Agent Best PracticesReal Estate Broker Best Practices
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Marc D. Gould

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