One of the most frustrating situations we deal with day in and day out in our high-cost area is lack of inventory. The question from a client, "there's no inventory out there. Any insights?" is one I hear quite often.
My response to this client went something like this:
Our low inventory certainly is a problem. You've seen the result--small homes needing a lot of updating/remodeling selling very high and very quickly, usually in a mater of days. One example: a house in one of our Peninsula towns closed last week. Listed at $1,399,000, it sold for $1,610,000 in 8 days, with 14 offers. It needed almost everything updated/remodeled, but felt structurally sound. This is the just latest example.
Ideas I mention below attempt to put you in the strongest buyer position possible. Some definitely aren't right for you (e.g., moving to another high school district); others might not be ideal, but something you could live with. Here goes:
Before anything else, get pre-approved for a purchase now, before you sell your existing home. (you're working on that, I know) Get a pre-qualification, a "what if" you sold your existing home first. Suggestion: also please ask your lender how quickly he can close once you're in escrow; that can be critical in our market.
Idea #1 - if you're in no hurry, we wait 'til a good possibility arises, then check it out immediately and act quickly, knowing you'll likely be competing with multiple offers and sale price considerably over asking. Pros: you can move once, and we'd sell your current home after you are out. That is often easiest for families.
Cons: it could take a number of months before you succeed in securing a replacement home.
Idea #2 - change the parameters of your search. The location (for example, I have a wonderful townhouse the sellers are willing to sell off market, 3BR; 2.5BA, 1640 sq.ft. large 2-car garage, and views of the Pacific Ocean. It will sell under 1.1M, BUT--not in your desired school district.) The amenities - we've talked some about a large 2BR instead of 3, townhouse instead of single family home. If you decide a carport would work (maybe secure off-site storage?) it would open up more possibilities. The price - if you went up in price, your savings by selling the larger house would begin to dwindle
Idea #3 - sell before you buy. Two ways to go about this: 1) live in the house while it's on the market; we'd try to finagle a rent-back 30-60 days after closing in hopes that you'd find a replacement home during this time. Pro: you'd know your financial state clearly; you'd be in a strong position as a buyer if you could be an all-cash buyer. Con: high stress, you might need to move into temporary housing. 2) rent something while the house is being sold, sell the house, money in the bank, then we find a replacement home for you to buy. Pro: you could be cash buyer; you know where you'd be living for the present. Con: 2 moves; might have to be willing to pay a cancellation fee or rental fees until the lease term is up or the unit re-rented.
I worked with one couple who chose Idea #3, second option. They found a rental in Belmont; we then sold their Mountain View townhouse; we shortly thereafter found a great house in Belmont which they bought--mostly cash with a small loan. To them, the security of knowing their finances, and simplicity of not occupying a house while they lived there, overruled the inconvenience of moving twice.
Every person is different, with different tolerances and concerns. Other ideas you might ask yourself (and share with me any that you think would be helpful for me to know):
- how long do you foresee living in a replacement home? Until the children are out of high school? out of college? indefinitely?
- once high school isn't a concern, would you prefer to be in a different town? a different type of housing?
- is there a financial need/desire to downsize? any certain date you'd like/need to shoot for?
I'm hitting you with a lot of info to digest, so take some time, discuss with your spouse so the two of you can come up with the plan that works best for you. As a strategy becomes clearer to you, or even if it doesn't, I'm more than happy to meet with you and talk over ideas to come up with a winning plan for you.
Until then, please keep me updated about your pre-approval and let me know when that's good to go.
For now, we're expanding locations and sitting pat for another month or so, hoping for that elusive inventory.