How do PhD graduates signal job interest to low ranked universities? I am envisioning a scenario where a candidate does not get interviewed by a university because the university believes the candidate is "over qualified", but the candidate is actually very interested in working at that university because of some outside reason (family in the area, spouse employment, etc). How does the candidate tell the low ranked university to consider hiring him/her, even if the candidate is overqualified? (I don't intend this to sound snobbish, I am just interested in how the process works).
I've been involved in many faculty searches over the years, and my institution and department probably meet your definition of "lower ranked." In the searches that I've been involved in, we simply don't skip over a candidate because they're "overqualified." Rather, we try to attract the best candidates and hope that candidates who aren't really interested in our position or who find a more attractive position will drop out of the search as early as possible.
Given the nature of the job market today, it's inevitable that many well qualified applicants who will ultimately end up at some more prestigious institution will have applied for our position. Even the most well qualified candidates need to hedge their bets by applying for dozens of jobs. I don't blame them for applying to our position as long as there is a reasonable chance that they would accept an offer from us.
We invite the best qualified candidates to phone interview. During the phone interviews we do our best to make clear what the job would be like (research expectations, teaching loads, salary, benefits, location, etc.) If a candidate is truly not interested in our position that lack of interest may be apparent during the phone interview. Some candidates get screened out for showing such a lack of interest. Sometimes applicants figure out during the interview (or shortly thereafter) that they're no longer interested in the job and ask to withdraw from the search. We invite the candidates who did best in the screening interviews for full on-campus interviews.
After the on-campus interviews we're typically left with two or three candidates that we like, and then we start making offers. It's not uncommon for our first or second choice to turn down an offer, but in practice we end up with what we consider a good candidate who is willing to take the job.
In the worst case we could always close the tenure track search, hire a visitor for the year and try again the next year. That hasn't been necessary in my department in the last 22 years.
If you're particularly interested in a position because of some family issue, then you can make that reason clear in your cover letter. In my experience, these personal reasons for applying for a job seldom end up being the factor that makes a candidate decide to accept an offer. From my point of view as a search committee member, I try to avoid using such factors in making my decisions.