Buying a Sacramento Home Parked in Shadow Inventory

When inventory is low and the quality of available homes for sale in Sacramento is spotty, it might seem like there are no homes to buy, but that’s because nobody is looking at the shadow inventory. Shadow inventory can be defined as a lot of things — it can be homes that have been foreclosed upon and not yet on the market, or it can pertain to the pending sales, active release, short contingent and temporarily off the market listings, among other select status modifiers.

You might find gold in those listings.

I’ve noticed that some real estate agents are diligently digging through MLS to try to uncover shadow inventory for their buyers. Buyers can’t find these listings on their own, for the most part. Oh, they can find homes that closed escrow a few months ago on websites like Trulia and Zillow, but much of that stuff is dated. Even our own MLS, MetroList, hides the status of some listings down at the bottom on the right-hand side, so buyers get all excited and think homes are available to buy when they are actually under contract.

This is when it pays to get in touch the listing agent to find out whether the agent and her seller might welcome a backup offer. The thing about a backup offer is it guarantees the buyer that nobody else can step in to snatch the home should the existing pending sale blowup. If the existing buyer cancels, a backup offer, properly prepared, would put the second buyer into first position, effectively locking out the competition.

You might wonder how many pending sales blow up? It’s hard to pinpoint exactly but it’s not unusual for some listings to sell 3, 4 or 5 times before they close. Part of that problem is unscrupulous buyers writing more than one offer when they can’t afford to buy two homes. Part is due to tightened lending restrictions. Whatever the problem might be in an existing transaction, having a backup offer can give the seller peace of mind and it can also be a bonanza for a buyer who missed out on making an offer for that home.

If a buyer has not lifted contingencies and the transaction is still influx, it might be a good idea to check out a few pending sales to see if there is an opportunity lurking in the shadow inventory for you.