The San Jose real estate market has been historically known for its fast pace and fierce competition. Today, it’s grappling with a phenomenon known as the “lock-in effect.”
Homeowners who secured low mortgage rates in recent years are understandably hesitant to sell. If they do, they would need to purchase a new home at today’s, higher interest rates. This reluctance has led to a noticeable scarcity of available homes, making the already challenging Silicon Valley housing space even more complex.
However, if you find a San Jose realtor, they aren’t idly waiting for the market to normalize. They are employing creative strategies and sharpening their professional focus to generate transactions. They are serving both sellers and buyers in this unique environment!
Let’s find out how.
How Real Estate Agents in San Jose, CA, Are Dealing with the Lock-In Effect
Mastering the ‘Buy First, Sell Later’ Strategy
For homeowners who need to move, the fear of losing their low mortgage rate is a major roadblock. Agents are tackling this head-on by becoming experts in facilitating contingent sales.
- Bridging the gap: They guide clients toward temporary financing solutions, such as bridge loans or HELOCs. These allow the homeowner to secure their new property first, alleviating the anxiety of selling without a place to go. This approach enables them to enter the buying market as a stronger, non-contingent purchaser.
- Creative financing consultations: Agents partner closely with mortgage professionals to help sellers understand the true cost-benefit of moving. They help homeowners to calculate how much home equity they’ve built up, potentially justifying a higher monthly payment on the new property.
Deepening the Focus on Life-Driven Moves
The pool of discretionary sellers has shrunk. As a result, agents are shifting their energy to target and serve the life-event-driven seller.
- Proactive outreach to key demographics: Top real estate agents in San Jose, CA, are focusing on life moments that necessitate a move—regardless of the mortgage rate. Divorce, death, retirement, or a major job relocation are some of the factors pushing a move. Marketing and outreach efforts are tailored to be sensitive and solution-oriented for people navigating these significant transitions.
- The downsizing imperative: Older homeowners with substantial equity may want to downsize or relocate for retirement. The higher rate on a smaller, less expensive property might still result in a manageable or even lower overall housing cost. Particularly, if they pay in cash or put a large amount down.
Agents, like TENACITY Realtors, are framing the conversation around freeing up capital for retirement. It’s not just about trading one mortgage for another, it’s about financial flexibility.
The Rise of the Pocket Listing and Off-Market Deals
In the real estate market, inventory is king. Agents are using their extensive local networks to find homes not formally on the Multiple Listing Service.
- Network nurturing: San Jose agents are more actively collaborating with their peers than ever before. A significant portion of their time is spent calling other agents to find out if they have clients who are “thinking” of selling but are hesitant to publicly list.
- Testing the waters: Sellers may be nervous about the market and the lock-in effect. By testing the waters, they can gauge buyer interest without the commitment and preparation of a full public listing. If the price and terms are right, an off-market deal can be quickly executed. This benefits both the supply-starved buyer and the cautious seller.
Highlighting Seller Incentives for Buyers
High interest rates are the main obstacle for buyers. Agents are working with sellers to offer creative concessions to make a deal happen.
- The rate buydown consultation: A top strategy is educating sellers on the value of offering a temporary or permanent mortgage rate buydown. Instead of dropping the list price, the seller covers the cost of lowering the buyer’s interest rate for 1 or 2 years. This makes the initial monthly payment much more palatable for the buyer, effectively bridging the affordability gap caused by the lock-in effect.
- Closing cost contributions: Agents coach people with homes for sale in San Jose to offer a portion of the closing costs. While not as impactful as a buydown, this cash injection helps the buyer save on upfront expenses. This makes the entire transaction more feasible.
San Jose realtors are embracing these flexible and client-focused strategies. They are proving that while the lock-in effect has changed the market’s dynamics, it hasn’t eliminated opportunity.
Realtors are adapting their roles to be more consultative, creative, and service-driven. This ensures they can still navigate their clients toward their housing goals, even if it requires a different route!