REALTOR Janice had worked two months with a couple who insisted on expensive renovations to every short-sale they liked, but could never agree on the cost of renovation. A friend suggested that as alternative to showing another short sale, show a new home because ‘it was already renovated' for price comparisons.
The couple visited two new home communities, purchased a new home and at the closing could not say enough good things about Janice. Today this Realtor works exclusively in ‘new homes' because she likes to travel and the ‘new homes consultants do all the work."
Used-home obsolescence (not my term!) may cast a long shadow over all existing inventory for years to come. You can read why in this foreboding CoreLogic piece that quotes NAR Chief Economist Lawrence Yun discussing the ‘historical underperformance of sales activity", entitled
The Rise Of Housing Obsolescence And Shadow Demand, with this not- too-subtle subhead: Inventory Of Existing Homes May Be Increasingly Undesirable.
"Housing obsolescence is defined as properties that are no longer desirable because their characteristics do not match what buyers are looking for in a home. For example, homes that are located in once, but no longer popular locations, or homes that are lacking the local amenities sought by today's buyers.
"Many people are holding off because they can't find the right one. Just as shadow inventory is the stock of properties in delinquency or foreclosure that are not yet for sale, these buyers waiting in the wings are the new ‘shadow demand."
"Maybe the reason that homes sales are not increasing is because buyers can't find anything they want to buy, "as the piece concludes. Maybe not. But this is the only conclusion agents who are not showing new homes can reach.
The market probable is that a good number of buyers, when given the choice to renovate or wait, are doing neither. They are buying new homes, mostly with the help of their Realtor, if their Realtor helps them find one. Unfortunately, this is a big ‘if'.
Granted, this market is hard to measure, because many of the new homes purchased are not listed in MLS.
According to the National Association of Realtors, 67 percent of all new homes sold in 2013 were sold by Realtors. To put it another way, Realtors' prospects purchased twice as many new homes as those who purchased directly from the builder.
But it is not always about unsaleable inventory. Sometimes it is about unbuyable inventory, such as failing to win bids for lender owned properties.
Case study: Realtor McMillan a new agent working with her first prospect had been submitting and losing bid after bid with the lender (sound familiar). She was about to lose them to the ‘we decided to wait' shadows.
In a small workshop, the speaker suggested that she show her prospects a new homes in the price range in which they were bidding. Within one week the couple purchased a new home, and closed in the next 30 days. You have to wonder if this commission might provide the cash flow needed to give this agent time to make more sales, before she, like so many before her, dropped out.
She said she would have shown a new home earlier but no one in her training class mentioned new homes.
Another case study. A short sale closing collapsed the day before closing because the seller had not moved and had decided not to sell. So the buyer, who had pulled a trailer down to Tampa from Maryland and was under pressure to buy, decided to purchase a new home for cash and closed in a week.
The buyer told me that she had moved five miles (five minutes) further out, but purchased a larger home for less cost per square foot, and ‘couldn't be happier."
Her Realtor, a ten-year veteran, had never showed a new home. After the closing, she swore to show new homes to as many resale buyers as she could as part of her showing schedule. .
Home shoppers will eventually understand that new homes are a real option to renovations, especially in desired locations. Expect more resale prospects to ask to see new homes or better yet make sure you qualify all prospects for new homes.
At what point will you know that your prospects may be a candidate for a new home?
Thanks to the internet, many home shoppers know what they want and think they have found it even before they meet you. That is until they do the one thing they cannot do on the internet-make a personal inspection.
If your buyer thinks the home needs renovating and they have neither the time or money to do it, why show another home that needs renovating?
It is at this exact point, that you, as a Realtor will know if your service is as obsolete as the home you showed, or as current as the next home they will see.