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How can I best work with buyers in a low inventory market?

Posted on February 16, 2022 by AREA Communications in Blog

Home to the Rocky Mountains, Canada's energy powerhouse, and the roller coaster real estate market – that's Alberta. One of the symptoms of our beneficial energy sector is that Alberta's economy, and subsequently its real estate market, has fluctuations that other markets don't see as regularly. One of these challenging markets is the low-inventory market resulting in buyers struggling to find homes that suit their needs while competing with other buyers for the few available listings.

Economics 102
Economics 102 was one of my favourite university courses. I'm not an economist, but one thing that stuck with me from that course is the relationship between supply and demand. The best way I have learned to explain it is like this: on one side you have supply, representing the number of homes available in each market. On the other side, you have demand, which represents the number of buyers anxious to purchase those properties. The only common language the two sides speak is price. As the inventory drops and the number of buyers remains constant, the price rises to help balance the scales. As the number of buyers drops when inventory stays constant, the prices will fall to try and balance the scales on the other side. This is a simplistic view, but it helps explain what we see in the real estate market.

Preemptive advice
The best time to handle an issue is before it happens. This requires the REALTOR® to have hard conversations with their buyer clients before they stare down the barrel of a multiple offer situation. For success in a low inventory market, it is crucial to take the time at the beginning of a home search to detail the process as well as potential situations like multiple offers. The buyer needs to understand what to prepare for and the speed the process will move. Using an Exclusive Buyer Representation Agreement at the beginning of the relationship allows clarifying roles and responsibilities to be clear so the buyer has a good idea of what to expect.

Price is a prince, not a king
In a fast-paced seller’s market, buyers need to understand that many factors go into a seller’s decision to accept a particular offer, and that means the price is not always king. Often, a specific closing date or lack of conditions will outweigh the price in the seller's decision to accept an offer. The buyer’s REALTOR® can best prepare the buyer for success by helping them think through the terms and conditions with as much attention as the price.

Don’t get caught up
In a high-pressure situation like multiple offers, the buyer can get caught up in the speed and anxiety of the process, forgetting key things that are important to them and falling into the trap of wanting to win at all costs. This could mean writing an offer at a price that an appraiser won’t be able to validate, removing a financing condition when the buyer really does need that protection, or even leaving out a property inspection condition that could discover unforeseen defects important to the buyer. A REALTOR® should help the buyer stay grounded and advise about potential liabilities through these negotiations.


In a low inventory market, preparation is key. Preparing the buyer for the market they are in by setting expectations early will help ensure a less hectic situation when they decide to write an offer. The advice from a REALTOR® and the ability to move quickly on the right property will always be the best recipe for success in a low inventory market. Then, like all roller coasters, once you are on the ride and the harness is down, all that's left is to enjoy the ride.

 


Bryan Statt

Provincial Practice Advisor

Bryan has many years of experience in the real estate industry including over 10 years as a former broker in the Edmonton Region.

Email: bryan.statt@albertarealtor.ca
Phone: 403-209-3619

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