One of the statistics that we in real estate pay attention to is the amount of current inventory or active listings on the market. “Inventory in Months” is calculated by dividing the “active” residential listings at the end of the month by the number of closed sales for that month. The resulting number gives us an estimate of the amount of time in months it would take to sell all the homes on the market, if there were no new homes added to the formula.

Buyer and Seller MarketsIn a normal and well balanced market, that number would be somewhere in the 5-6 months range. Currently in Portland Metro that number is 2.3 months. This is one of the lowest inventory numbers we have seen, ever! Since real estate responds to the theory of supply and demand just like any other commodity, we are currently experiencing more power in the hands of the seller and thus the term “seller’s market”.

What do seller’s gain in a seller’s market? Multiple offers, quicker sale of their home, higher sales prices, less costs for repairs and controlling the closing date, just to name a few. The challenge for sellers is that they too will probably need to buy something after they sell their home…and then the shoe is on the other foot!                                                                                                                                                                       I have no doubt that we would have more sellers right now if this issue of low inventory were not holding many potential sellers back from listing their homes. Most homeowners do not want to have to sell and then move in to a rental until they can find another home to buy and then move again.

The real purpose of today’s Fresh Blog is to offer “fence sitting sellers”  three viable solutions to this dilemma. There may be others, but I like these the best:

  • Negotiate a “Rent Back” from your buyer. Since sellers hold most of the cards in the sale of their home right now, I would help them negotiate with the buyer to close their sale in escrow and then rent back the home for up to 90 days. This will usually require a security deposit (just like normal renting) and a rent amount that is equivalent to the buyer’s mortgage payment. This payment will often be higher than what the seller was paying, but it is well worth paying more for a few months so that they don’t have the cost and effort of moving twice. Depending on how hot a commodity the seller’s home is, I would help negotiate that rent back payment down. 90 days should be enough time, even in this market to secure a new home for the seller.
  • Negotiate a sale with the buyer that is contingent upon the seller securing a suitable home purchase within 90 days. This is more difficult than option #1 because the buyer may feel may not actually get the home they want if the seller doesn’t find and buy a new home. With this tactic, there may need to be some compensation in the negotiations for the buyer in return to keep them excited about hanging in there. But, if it helps the seller get what they need (which is usually some time) it may be well worth it for seller to compensate the buyer.
  • Negotiate an extra long escrow period and closing date. This is my least favorite option as during a long escrow a buyer could possibly change their mind about buying the home and terminate the transaction. If this solution is negotiated, I suggest a larger earnest money deposit from buyer is also negotiated so buyer will think twice about terminating.

These types of negotiations between buyer and seller can be complex and there are numerous pitfalls, so make sure you are using a great Realtor and also consider hiring an attorney for additional counsel. These  solutions are very doable if the seller’s home is a strong commodity, located in a desirable location, shows really well and is not overpriced.

In this seller’s market, the sellers will usually get top dollar on the sale of their home. Many agents, including myself, have buyers “chomping at the bit” for new listings to appear. So, OK all of  all you “fence sitting sitting seller’s”,  go ahead and give me a call and let’s get you sold and moved!

Hope this helps. Have a fantastic February everybody~

Best wishes,   Kevin G. carry-money-house




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