Home Buyers Are Feeling the Pressure

First-time buyers are typically nervous and excited about purchasing their first home.  They have much to consider for example, such as neighborhoods, schools, taxes, maintenance, HOA fees, insurance, and mortgage payments.  The current shortage of homes at affordable prices adds fuel to that fire, but main concerns hear from clients are the competition from cash investors and multiple offers.

Cash Buyers
Cash rich investors are snapping up properties to flip or rent at staggering rates.   The National Association of REALTORS chief economist, Lawrence Yun, states that "home supply is diminishing, but investor demand is not going away."  I see this increasingly in the $200,000 and under price range in the Dallas area.  Investors will make offers on homes in almost any condition.

According to today's Wall Street Journal, many investors are taking advantage of the demand for rentals, which has "boomed."  Rental vacancies nationally were down to near record lows, and median rent was up 11% over the past year.  

Many investors are buying homes sight unseen. In just the past week, I have personally dealt with three out-of-state investors who are willing to pay cash for properties in just about any condition, with  no desire to see the property before making an offer.  

When a buyer (first time or otherwise) finances a purchase, there are contingencies that could delay or stop closing the transaction, which can include appraisals, lender-required repairs, or delays in the lender underwriting process.  When selling to a cash buyer, sellers have no need to worry about such contingencies.  This is why sellers will typically accept a cash offer over a financed offer, even if the cash offer is slightly lower.  Cash transactions are simply quicker and less stress for sellers.

Multiple Offers
Multiple offers and sale prices above list price are the new norm.  Larger earnest money deposits, shorter option periods, and fewer seller concessions are all typical.  Although everything is negotiable, sellers now frequently outline what minimum earnest money and option fees are expected in the multiple listing service data for their property. 

When a new listing becomes available, there is a mad dash of showings within the first few days.  Brokers and their clients are constantly on the look out for new listings so that they can get there before other buyers.  I've shown homes recently where there was a line of agents and clients three deep to tour homes at 10 am Sunday morning.  Buyers simply have to be available in a moment's notice to access to the newest properties for sale.  It's important to work with a broker who knows what homes are "coming soon" and those that are for sale but not on MLS (known as "hip pockets).

Bottom line?  
Now, more than ever, buyers should use an experienced broker who is available on short notice to view new listings and who knows how  to structure a fair offer while looking out for his/her client's best interests, home buying can still be a pleasurable experience, even for first timers.