When a property doesn’t sell, it’s because the buying public is rejecting it at the asking price. The solution for sellers is to either lower the price or improve the property — this is where there is great opportunity for buyers.
There are three main ways to find a great house in a low-inventory market like Washington.
First, look more closely at the properties in Bright MLS multiple-listing service that have been sitting. Those that have been rejected by the buying public may have spent 100 days or more on the market.
Chances are, these properties were priced too high from the start. The sellers don’t receive any offers, so they drop the price. Then, when buyers are searching for “new” listings, they don’t pick up on the lowered price or even notice these “old” listings.
For example, there is a fantastic waterfront property sitting on the market in Annapolis, Md. It went on the market six months ago and was initially priced at $1.3 million. Without any showings, the sellers realized they were out of money and gradually stepped the price down by about $50,000 a month. It’s now priced at $895,000, but it continues to sit without any offers because it’s no longer on the radar of waterfront buyers. Because it has been on the market for months and the price has continued to decrease, it looks like a distressed property, and so it just sits without even being toured by prospective buyers.
Buyers who are up to the challenge of doing some work on their new home should consider targeting properties priced 20 percent below their total budget, with the intention of putting money into the right renovations to make it their dream home.
For example, if a buyer can afford a $500,000 home, they should consider looking at a $400,000 fixer-upper. The key is learning to see what the home could be, instead of what it is now. That $100,000 can often go much further in terms of renovations than it would toward buying a move-in ready home.
Contrary to popular belief, there are appropriately priced properties on the market in the Washington area right now. Many just need more work than the average buyer is willing to take on, so they end up sitting. If a buyer is willing to accept some of that deferred maintenance and invest the time and resources in a renovation, there are some great deals to be found.
There are also renovation loans available at all price ranges, so even FHA buyers without much cash to put down can make this work by financing their improvements.
Real estate professionals in the Washington area have an exclusive window into what the industry calls “coming soon” listings. These are homes that are not yet on the national portals or even visible to the public on a broker’s website. Real estate professionals will often have between 10 and 21 days advance notice before the coming soon listings go live to the general public.
Buyers should ask their real estate agent to set up alerts when properties in their target locations and budget range hit the “coming soon” market. With early access, they may be able to get the jump on other buyers shopping for the same type of home.
Low inventory doesn’t have to be a barrier for Washington’s would-be home buyers. By thinking a little outside the box and expanding your search criteria, it is possible to find the right home at the right price.
Jon Coile, chairman of Rockville-based multiple-listing service Bright MLS and chief executive of Champion Realty, writes occasional commentary about the Washington-area housing market.