LONG-TERM INVENTORY SHRINKING
- By JanHaysSold
- •
- 29 Mar, 2020
Seasonal inventory levels tend to bottom out in late winter then begin to build back up in April or May before peaking in October. During the big recession inventory levels often hit three-times normal levels. With the exception of a recent fifteen-month period, year-over-year (comparing a given month to the same month but prior year) inventory levels had been falling. In addition to seasonal shifts, the chart above shows where YOY inventory shifted to increasing(August 2018), and the recent shift back to decreasing (December 2019).
In January of 2018, listings were down 11% from the preceding year. In August of 2018, that trend shifted and for the first time in over 10 years, there were more active listings in the later months of 2018 than the same month a year ago. By December of 2018, listings were up by 14%. The spread continued to grow into 2019. It maxed out in March andMay (20% and 19%) before beginning to fall off. This recent November there were only 3% more listing than last year, but on December 1st, current active inventory dropped 1% below last year’s level. Inventory levels, which had been trending down for over a decade, enjoyed an upswing for only a year before dropping again this month.
For years, buyers have been challenged in finding and competing for well-appointed move-in-ready homes. For a short time, growing inventory brought some relief. Keep an eye on these year-over-year inventory levels. If they continue to fall, buyer choices will be limited and sales will slow. Of course, that could create seller opportunities with demand exceeding supply.
Selling your house can be a very stressful experience for homeowners. It can be emotionally challenging to make repairs or upgrades to a house that you’re about to hand over to a buyer; you often need to keep the home in pristine condition for marketing and showings; and even if you find a buyer who’s perfect for your place and everything seems to be going swimmingly, a last-minute loan problem can derail your deal and send you back to the beginning — through no fault of your own.
It’s no wonder that many homeowners would prefer to work with an all-cash buyer when selling their house. The sales process with an all-cash buyer is almost always smoother and more convenient for the seller, with no loan contingencies that might cause a sale to fall through, and the seller usually doesn’t have to make any repairs to their house before transferring ownership to the buyer.
But there are also some drawbacks to working with all-cash buyers, and some additional factors you need to take into consideration before you decide to go this route. Weigh all the pros and all the cons, and the extra due diligence you might need to do, and then make an educated decision about your own situation.
The pros of working with all-cash buyers
Faster closing time
One big benefit of working with an all-cash buyer is that the closing process is likely to be much faster (and smoother) than working with a buyer whose purchase is financed. Getting a mortgage loan fully approved and deployed usually takes about 30 days, and there’s a lot that can go wrong in those 30 days that could cause the buyer to drop out of the transaction and send sellers back to the listing market to find another buyer.
A mortgage loan almost always requires two procedures that a cash buyer can choose to waive: the inspection and the appraisal. Many cash buyers will still ask for an inspection in order to get a full sense of what might need to be repaired in the home, but it’s not uncommon for them to agree to tackle minor repairs, letting the seller off the hook for those.
Appraisals are required in a financed deal so that the lender knows that the home is worth the amount of money that the buyer is paying for it (and the amount of money that the lender is loaning the buyer); if the all-cash buyer and the seller have agreed on a price, though, an appraisal really isn’t necessary. Bypassing the appraisal (and sometimes the inspection) can also help to shorten the closing timeline; an all-cash deal can usually close in about two weeks.
You can sell as-is
About three-quarters of all-cash buyers are investors, which means they’re intending to fix the homes that they buy and either flip them (sell them for more than they paid) or rent them out. Those investors usually have their own parameters and preferences for the appliances, flooring, systems, and other features of the house that typically need to be repaired or upgraded for a financed seller. An investor will want to tackle those repairs and renovations themselves to get everything done to their standards and specifications — that means the seller doesn’t have to worry about it at all.
If your home is outdated or needs minor repairs here and there — adding up to a significant amount — and there are financial or other reasons why you’d prefer not to handle those repairs yourself, then working with an all-cash buyer might be an option you want to consider.
There will be fewer (or no) contingencies
In a financed sale, buyers — and lenders — might request all kinds of contingencies that sellers will have to accommodate. The biggest one is the financing contingency: If the financing doesn’t clear for whatever reason, then the sale will be canceled. There’s also the appraisal contingency, which stipulates that if the home appraises at a lower price than the sales price, you’ll have to ask another appraiser’s opinion (and pay for the appraisal) or negotiate a new sales price that more closely reflects the appraisal price.
Other contingencies might put the burden of paying for repairs or closing costs on the seller. All-cash sales don’t include financing or appraisal contingencies, and other contingencies are usually easier to negotiate for all-cash sales.
The sale is more likely to close
When the buyer doesn’t need to rely on a lender to secure financing to buy a property, there’s a higher likelihood that the sale will reach the closing table without any snags. There are all kinds of reasons why a lender would pull out of the sale, leaving a buyer high and dry, but if buyers aren’t using a lender at all, then all of those possible roadblocks are removed. This can be a powerful incentive for sellers to accept an all-cash offer, despite the drawbacks (which we’ll cover below) — sometimes it’s preferable to have an almost-guaranteed sale and get the whole process over with.
The cons of working with all-cash buyers
Most all-cash buyers are investors
If you’ve got a strong emotional attachment to your home — and many homeowners do! — then you might not be all that excited to sell it to an investor instead of a private buyer, and most all-cash buyers (about three-quarters of them) are investors. Instead of moving into your house and living there, investors will either be making all those minor repairs and upgrades that will help them get a higher price, then re-listing and selling your house for a profit, or they’ll be renting the house out.
Either way, if you made memories (such as raising pets or kids) in the property and were hoping to pass it along to a buyer who will treasure it the same way you do, then working with an all-cash investor buyer might give you pause.
You might not get full price
The all-cash investor buyers who want to fix and flip your home have one goal in mind: They want to make a profit on the sale, which means that they’ll need to sell it for more than they paid for it and more than they spent to fix it. One of the best ways to do that is to pay under market value for your home, so if you are hoping to get a relatively high market price per square foot for the place, then an all-cash buyer is very unlikely to offer that. Some all-cash buyers will only offer around the amount of money you still owe on your mortgage, which could be significantly less than you could capture on the open market.
Scams can happen
To be clear, most all-cash buyers operate ethically and above-board — but there’s no licensing needed to become a real estate investor, and there are some all-cash buyers who aim to take advantage of sellers who are in a desperate situation. When you start talking to all-cash buyers, it’s a good idea to do your due diligence and look up the company through the Better Business Bureau, paying close attention to any complaints.
One big red flag is an all-cash buyer that wants the seller to pay an application fee; if an all-cash buyer asks you to pay a fee like that, be warned that it’s very likely this buyer is trying to take you for a ride.
Other things to consider when working with all-cash buyers
You’ll need to verify proof of funds
The term “all-cash” is at least slightly misleading — the buyer isn’t going to show up at closing with a suitcase full of money. Instead, they’ll write a cashier’s check or transfer the money to your account as the seller, so before you accept the offer or go under contract, it’s perfectly reasonable to verify the proof of funds. This basically means you’ll take a look at official financial documentation (such as bank account records) to ensure that the all-cash buyer actually is good for the sales price.
If you’re not sure how this works, talk to a real estate professional or title representative about what’s involved and how to go about verifying proof of funds.
Do some research
As noted above, not every all-cash buyer is an ethical operator, so it’s up to you to do some research on the buyer and make sure that the person or entity on the other side of the table is above-board. Spend some time looking at online reviews (if available), ask for references, and do your best to ascertain how trustworthy the buyer is before signing anything that binds you to an agreement.
You’ll still need a title company
An all-cash real estate deal can potentially eliminate some of the traditional roles involved in selling a house, but one that you should still expect to work with is the title company. There will still be paperwork involved to officially transfer ownership of the property, and the all-cash buyer will want to make sure that any liens on the house (second mortgages or home equity loans, for example) are documented and handled appropriately.
You may have options you haven’t explored
If you’re in a financial or life situation that is driving your desire to sell — and sell quickly — be aware that you might have options beyond selling to an all-cash buyer. In markets or neighborhoods with high rent prices, for example, you might be able to make some basic repairs to your home and then rent it out, paying for the mortgage and generating some extra income every month on top of that.
In some markets where home sales prices are growing or strong and stable, you might be able to work out a delayed payment deal with some general contractors; they’ll get paid for the work after your home sells (for full price) on the open market. Accepting an all-cash offer for less is almost never your only option, so try to explore all the possibilities before you decide to go that route.
Forgoing an agent can be a mistake
You don’t necessarily need to work with a real estate agent in an all-cash home sale scenario, and there are plenty of sellers who decide not to use an agent. The choice is entirely yours but think about the potential ramifications before you decide to go it alone.
Many all-cash buyers do multiple real estate deals in a year, and they intimately understand the intricacies of the process. If you don’t have the same level of experience and you’re not working with a qualified professional who’s protecting your interests, then how can you be sure you’re doing the right thing and getting the best possible deal for your household? An agent’s top priority is to represent their clients to the very best of their ability, and if you’re trying to save money by eliminating the agent’s commission, you could very well be losing money in the long run.
Style is as individual as human beings are, but we can generally agree that there are some style trends that should be left in the past — some in the very recent past, others long ago — because they make your rooms look, well, terrible. And dated. Before you jump on the latest home decorating bandwagon, consider how these super-popular decor trends have fared and imagine whether you’re still going to think your latest design obsession looks cutting-edge in a year or three.
CLUTTER
We’re not saying that it was ever a good look to resemble a hoarder, but there was a time where just the “right amount” of clutter was a decorative goal. That eclectic, bohemian look involving lots of different items and patterns and … stuff … just all over the place is officially over. And thank goodness, too, because keeping all those tchotchkes dusted and the surfaces cleaned is tough.
… AND TOO MUCH MINIMALISM
Just as bad as too much clutter is the bland, too-neutral hotel-room look. Hey, clean lines and white or neutral everything is awesome in moderation, but when they are all over your house with no color or pops of interest to draw your eye, it can make your place feel soulless and flat.
MATCHING EVERYTHING
Pop quiz: What smells do you associate with a room with curtains or valances that precisely match the furniture upholstery? If “musty” and “mildewed” made your list, congratulations — you passed! When everything is matchy-matchy, it makes your house look like it was decorated decades ago and then inhabited by someone with no intention of changing anything ever.
EDISON BULBS
Look, these were cool for a little while, in that whole minimalist-industrial kind of way — but the light they emit is harsh, and there are so many better light fixtures (and bulbs) that will make your home shine. Pack the Edison bulbs away, please.
FAKE PLANTS INSTEAD OF REAL
Some silk plants are very well made and impossible to differentiate from real plants at a glance … but those are few and far between. Most of them age quickly, getting dusty and ragged around the leaf edges, and when there are so many houseplants you could be nourishing suited for every light level and size of the room, why go fake?
OBSESSIONS WITH MONOCHROME
Just like matched patterns, homes that are done all in a single color only help to date that home, depending on the color. People are going to associate the all-gray look heavily with 2017 and 2018, for example, and you can probably think of other instances of color taking over a dwelling.
APPLIANCES AND BATHROOM FIXTURES WITH COLOR
Another color that’s going to be forever associated with an era is avocado green with the 1970s when you saw fridges, stoves, bathtubs and sinks and showers and more in the shade. The cherry-red KitchenAid stand mixer on your counter is one thing, but please reconsider before opting for fixtures with color.
MACRAME
Maybe it seems like we’re picking in the 1970s, but decorators tend to agree this was a distinctly awful era in home decoration, so this won’t be the last time a trend from that decade appears on this list. Macrame everywhere is another easy way to make your house look immediately dated.
PLASTIC FURNITURE COVERS
Sure, they protect your furniture — but at what price? They’re not comfortable to sit on and they look awful. It’s a good way to make everyone who sits down in your living room feel like they aren’t at home.
VERTICAL BLINDS
These don’t generally do a great job of blocking the light, are a pain to open and close, and don’t look all that nice when they’re either open or closed.
INFLATABLE FURNITURE
This has been around since the 1960s, but it was suddenly revitalized in the ’90s and so you still see it here and there from time to time. It’s impossible to sit on with bare skin (especially in the heat) and it’s not all that comfortable, either, so there’s no sense in indulging in the inflatable trend if it comes back again.
LINOLEUM ANYTHING
Linoleum was really popular when it came out in the middle of the 20th century, and it’s easy to understand why it was a hit: Easier to clean than other flooring options and offered in bright, inviting patterns. But it doesn’t wear well, shows damage prominently, and will end up making your kitchen or bathroom look shabby or sad in a few years.
INDUSTRIAL STYLE
There’s no reason to eliminate all the exposed brick and metal aesthetic from your life, but the industrial look is another one that’s going to be specifically pinned to an era before much longer. Softening up those industrial-driven spaces with more traditional furniture and fixtures can go a long way toward giving your decor longevity.
SHAG CARPET
This is another trend firmly linked to the 1970s, and there’s a good reason why it really hasn’t experienced a revival since then — it’s incredibly inconvenient. It gets dirty at the drop of a hat and is impossible to clean; even vacuuming it can be problematic. Maybe at some point in the future, new advances in microfibers will make shag carpeting both stain-proof and self-cleaning, but until that day comes, opt for a style that has more staying power.
WOOD-PANELED WALLS
Wood has a lovely texture and looks in nature, but too much wood in one place is overwhelming and can make rooms feel cavernous and uncomfortable. This includes veneers and shiplap! Use wood to accent your rooms and in your furniture — or even on the ceiling — but walls and walls and walls of wood could be too much.
WALLPAPER BORDERS
These were all the rage for a time in the 1980s and 1990s, either applied where the wall meets the ceiling or at about waist height to divide walls around a room. With so many better options in paint and wallpaper available today, there’s no reason to use a border.
ANIMAL PRINTS
Some people absolutely love animal prints everywhere, and many of them are adolescent girls who throw them all over their rooms because they simply don’t know any better. It might be unfair, but that’s why a home entirely decorated in animal prints seems a little immature.
ANIMAL REMNANTS
Whether or not you hunt is beside the point, which is this: Your home is not a hunting lodge (most likely), and animal heads and skins or other parts used to decorate your house should be used in strict moderation, if at all. Many who eat meat still experience discomfort in a room full of hunting trophies, and they might not feel welcome in your home.
TILE COUNTERTOPS
These look fine, but cleaning them is a pain (especially the grout) and they’re associated with a particular period in kitchen and bathroom decor. A single slab of marble or granite will serve you much better than tile.
GLASS BLOCK WALLS
For a while, homes were being built with those blurred glass blocks to allow light to pass through walls while still physically delineating boundaries. You can get more light with skylights, fixtures, or even a bulb upgrade in this day and age, and considering you can still kind of see through the glass, it makes sense to eschew these blocks in favor of something else.
PINE EVERYWHERE
We’ve already established that wood paneling is too much wood, and homes decorated in that trend where all the furniture and cabinets are pine tend to suffer from that same feeling of overwhelm.
POPCORN CEILINGS
These are much maligned in decorating circles, and for good reason. For a while they were ubiquitous, but thankfully they’ve been phased out in favor of other ceiling styles, and now they’re not only ugly but dated.
WORDS ON WALLS
The decals made them so easy, and everybody else was doing it, but we’ve all seen the homes where someone went just that edge overboard with the inspirational quotes and words on walls. Instead of plastering your house with word decals, choose decorative items that are meaningful in a similar way but that spark a conversation instead of trumpeting your viewpoint.
ELABORATE WINDOW TREATMENTS
Valances and swags have come in and out of style, but if you want your window treatments to seem timeless, opt for something simple and classic over an elaborate, trendy mess. Simple curtains or even wooden blinds that fit the window correctly and cover the entire window can go a long way toward helping your house look constantly up to date.
CARPET IN THE BATHROOM
Anyone who’s bought or sold a house before is already aware that the right agent can make a big difference in your experience. But what about the brokerage where the agent is affiliated — does the brokerage involved in your home transaction really affect you as a consumer?
Brokerages can provide different services for buyers and sellers. If you’re selling a house, here are some of the things you can (and should) expect from many brokerages.
Marketing
One of the most important things that a brokerage does for sellers involves marketing their listing, letting qualified buyers know it’s available and providing the information those buyers crave in sleek and lovely presentations. Spend some time looking up homes in your neighborhood on Zillow and take a look at some of the photos and listing descriptions. You’ll probably be able to tell pretty quickly which real estate agents invest in staging and photos, and which ones try to skate by with smartphone snaps. Some of that has to do with the individual agent, but some brokerages have standards and parameters around what needs to be done to promote listings.
Education for you
Most people don’t sell a house every day — or every year, or twice a decade — so there’s a lot you might not know or remember about the process, and it’s part of your agent’s job to help educate you about the gaps. The agent’s brokerage can play a part in this, too, by providing resources and potentially even classes to help get you up to speed. You might not think you need to learn anything about selling a house, but at the very least, it’s helpful to get an idea of what the market is doing so that you aren’t surprised at the price agents to suggest when you start interviewing them.
Education for agents
The licensing requirements for real estate agents vary in every state, but each state requires some basic education in addition to continuing education as the years’ pass. Those are baseline requirements that might not cover everything an agent realistically needs to know to do business in your market, from legal restrictions to negotiation best practices. Some brokerages prioritize education for their agents more than others, providing seminars, webinars, reading materials, regular meetings, and other resources to make sure their agents know what’s new and what’s critical.
A network of buyers
One of the biggest reasons why a seller would want to use a real estate agent in the first place is because agents can help expose your home listing to a broad section of buyers who are qualified to buy your house and interested in your specific dwelling. This is why listing your home as a for-sale-by-owner can be risky — you don’t have access to the agent and brokerage networks of buyers. Some brokerages offer “coming soon” programs, where registered and qualified buyers can learn about homes that match their criteria. Others are part of independent or franchise networks that stretch across the country, so you can even reach buyers moving to your area.
A network of mortgage and title pros
Just like real estate agents, you’ll find a wide variety of mortgage and title professionals who specialize in different things. If you want a jumbo loan, or you’re purchasing rural property, or a condo or you don’t have a full down payment — all of those are situations where you might want to consider using a specialized mortgage broker who can give you a full range of options. Similarly, there might be idiosyncrasies with your home loan or liens on your house that require a qualified title professional to parse. You probably don’t know how to find these people, but your real estate broker will, and they’ll also know which mortgage and title operatives are responsive and helpful, and which ones sometimes take a shade too long to respond to your needs.
Processes and procedures for the transaction
Home sale transactions are complicated beasts, legally and financially and even emotionally. Some brokerages have streamlined processes outlined that their agents are supposed to follow to make the transaction easier for everyone, while other brokerages don’t oversee the transaction quite as much. Some brokerages also have administrative staff to help their agents with some of the transaction details, which can make a big difference to you as a seller because you might have a designated point person in the office to help keep you updated on your sale.
Help packing up and moving in
Not every real estate brokerage is a concierge brokerage that will help you dot all the I’s and cross all the t’s, but if that’s something you think you might need, then there are brokerages who will offer help with absolutely everything to do with your move. If you’re staying in town, they’ll arrange for movers to come to pack your things and transport them to your new home. Some brokerages also contract with a handyperson they book to come over to your new place and make any small fixes or adjustments that you’ve noticed a week or two after you move in. Others will provide help setting up your utilities and changing your address. As you probably know, when you’re in the middle of moving and selling your house, every little bit of help can make a big difference in your experience.
Neighborhood events
Brokerages at their best are community resources, and real estate brokers are people who know everybody. Some brokerages offer community events every now and then, such as summer barbecues or Fourth of July fireworks, harvest festivals in the fall, holiday celebrations, Easter egg hunts — the list goes on. If you’ve worked with brokerages established in certain neighborhoods, these events can be an excellent way for you to meet your fellow residents and mingle a little bit.
Ongoing information
When it’s 9 p.m. and you need an emergency plumber, or your electricity goes out on Christmas Day, do you know who to call? If you don’t have a contractor on hand already, talk to your real estate broker about people they recommend. They’ll know people who can paint your house, pave your driveway, fix your water heater, or install a fence, and they’ve probably also heard all of the stories around town about every contractor, so you can save yourself some time and headaches by just starting with your brokerage first.
