First-time Homebuyers Are Getting Outbid by Big Companies

The following is an except of an article published by Florida Realtors on April 23, 2021

Landlords, large and small, are lining up to buy homes as investment properties.

Home shoppers aren’t just competing against each other in bidding wars these days. Landlords, large and small, also are lining up to buy homes to use investment properties, according to a recent study by Irvine-based John Burns Real Estate Consulting highlighted by the Wall Street Journal.

About one in five homes sold in 2020 were purchased by investors, both nationwide and in Southern California, the study found. It could be institutional investor groups, publicly traded companies, pension funds, and even large foreign behemoths.

Locally, however, mom-and-pop ventures are responsible for most Southern California investor purchases because of the region’s high home prices.

First-time homebuyers and other low-down-payment buyers (less than 20% down for example) cannot compete. The big boys come in with cash. They have the financial resources to win every bidding war. No contingencies. No fuss. No muss. Close fast as you can.

First-time homebuyers rightfully want a property inspection and need a mortgage. The mortgage typically requires an appraisal. Takes time. If the appraisal comes in short of the sales price the listing agent and the seller get to repeat the solicitation process because the buyer may not be able to cover the shortage with such few shekels.

Buyers get rejection fatigue. Many commission-compensated realty agents figure out they are throwing good time after bad as offer after offer gets turned down.

Orange County is a leading indicator. It is shocking to learn that 3.5% of all Orange County residential 1-4 unit parcels are owned by corporate entities with portfolios of 200 or more properties, according to ATTOM Data Solutions. That’s nearly 30,000 residences out of 846,000 parcels behind the Orange Curtain are owned by these behemoths.

President Biden’s latest spending proposal includes a $15,000 tax credit for first-time buyers. That buyer might not be able to use the tax credit if he or she doesn’t have a boatload of down payment money.

The American Dream has been real for so many as a form of stability and family wealth building. Consumers who want to own and can afford to own should be first in line. Competition should not apply in this case.

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