Home Sellers Often Sell Homes Perfect For First Time Buyers... To Investors


Home Sellers Often Sell Homes Perfect For First Time Buyers... To Investors
By Scott Rogers • March 30, 2023
Over the past few years, townhouses in or near the City of Harrisonburg between $175K and $250K have been a hot commodity! This type of property is perfect for first time home buyers... ...but... ...this type of property has also been quite attractive to investors. And, what is a seller to do when receiving the following three offers on their townhouse... [1] An offer from an intended owner occupant contingent on the buyer financing 95% of the purchase price. [2] An offer from an investor contingent on the buyer financing 75% of the purchase price. [3] A cash offer from an investor. If all other terms (price, contingencies) were equal, most sellers would find the third offer to be most preferable, followed by the second offer. The first offer would be the least favorable to most sellers. For many or most sellers, the amount of a buyer's downpayment (5%, 25%, 100%, etc.) is often a proxy for certainty of successfully making it to closing. If a buyer already has the cash to buy the property - wonderful! If a buyer has 25% of the purchase price as a downpayment - still pretty good! If a buyer only has 5% of the purchase price as a downpayment - not as ideal. And as you can imagine from the information outlined above, so long as there are investors making offers on properties that would be perfect for first time buyers.... the investors will probably be the ones securing the contract to buy said property. So what? For Sellers - This is not a problem at all. Having a variety of offers from which to choose is... ideal! For Investor Buyers - This is great. It's nice having a leg up over some of the other competing buyers. For First Time Buyers - This stinks. I'm renting a townhouse now... and you're telling me I can't manage to buy a townhouse because I'm competing against investor buyers who are going to buy townhouses and then rent them out to people such as myself? Ugh. How do we break the cycle? Indeed... if there were a desire to make this dynamic / situation "work better" for first time buyers... how would it be done? [1] Individual sellers could certainly opt to sell their townhouse to first time buyers with less favorable (less certain) financing. [2] Investors could (maybe?) eventually decide to stop buying as many properties as rental properties if prices (or interest rates) are or become too high to make that type of an investment feasible. [3] The City could provide a financial incentive to sellers of properties under $250K (for example) if they sold them to first time buyers. ;-) It's hard to imagine this one happening but it could be an interesting strategy for the City to utilize to attempt to increase home buying opportunities for first time buyers. Receive Updates by Email Recent Articles: There Are Plenty Of Types Of Houses That Exist That Just Are Not Available To Purchase Home Sales By Price Range In The City Of Harrisonburg Are You Compromising On Aspects Of Your Next Home That You Can Or Cannot Change Later? How Much Slower Are The Winter Months In Our Local Housing Market? Rockingham County and New Home Sales Drive Surge in Area Housing Market Find The Balance Between Optimistic And Realistic Home Pricing Room Size Is Difficult To Understand Solely From Real Estate Photos How Much Would You Value Not Having To Prepare Your Home For Showings? One Out Of Four Homes Is Taking Longer Than A Month To Sell Consider The Cost Of Your Planned Renovations When Planning Your Offer
Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com
Based on information from the Harrisonburg-Rockingham Association of REALTORS® or its MLS, for the period Jan 1, 2000 through Nov 22, 2024 (unless otherwise noted).
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