First-time home buyers face tough competition
First-time home buyers are critical to the housing industry. Once they get in the door, this enables the former first-timer to move up. In a nutshell, first-time buyers help to keep the housing ladder moving.
What has skewed this traditional ladder is the number of distressed homes on the market. There are more homes than buyers. So I wasn’t concerned when I read the latest statistics that some investors had beaten out first-time homebuyers to a purchase. The market needs investors, too.
What made the topic a bit more interesting was a call from an investor friend who conducts rather thorough research in his goal to obtain one rental property each year. Historically, his key variables have been location, condition of the property and the ability to rent it out to pay the mortgage – or the money borrowed/invested to purchase and maintain the home. Recently, he’s looked for attractive financing terms, especially situations where the seller (or foreclosing lender) is willing to carry all or part of the financing for a few years.
“I lost the place to another investor,” my friend said. “The buyer was a Realtor.”
This should not come as any big surprise. In fact, on May 17, statistics from the National Association of Realtors revealed that 22 percent of all existing home transactions were to investors.
“A good portion of the investors are likely to be Realtor members based on the fact that Realtor population historically has had a notably higher percentage of second home and investment home ownership compared to the general population,” wrote Jessica Lautz, National Association of Realtors research economist. “The most recent data suggest 43 percent of Realtor members had at least one investment property.”
The National Association of Realtors has approximately 1.1 million members and is the nation’s largest trade organization. However, not all salespeople are members. Some analysts estimate the number of real estate agents in the U.S. is close to 2 million.
The question becomes: Should a person who serves home buyers and sellers for a living be held to different guidelines if they are competing to purchase a home? For example, should the listing be exposed to the market for a certain amount of time (perhaps 48 hours) before a licensed agent can buy a home that somebody else is ready, willing and able to buy? Especially if that party is a first-time buyer?
In this market, the seller probably does not care. While multiple offers are starting to surface in some neighborhoods, many sellers simply want out and will take the first solid deal that is presented. Rarely are new listings snapped up in the first few days on the market by an investor in competition with a first-time home buyer. However, it has happened and will continue to occur as the attractive investor market continues.
“It is the agent’s obligation to get the highest possible price for the home,” said Alan Tonnon, real estate attorney, author and a charter member of the Washington Real Estate Commission. “That price may even be higher than the listing price. It is typically in the seller’s best interest that no restrictions be set on offers so that the seller can consider all offers.”
Many real estate brokerages are members of multiple listing services. These “multiples” are large listings of all the properties available for sale in an area. When a seller signs a listing agreement to sell a home, the agent accepting the listing typically has until 5 p.m. of the next business day (formerly two business days) to enter the property in the multiple. So, if the property is listed Friday, the agent has until 5 p.m. Monday to enter it in the multiple.
When homes are moving quickly and certain areas become extremely desirable, it’s common for a property to be sold to a client represented by an agent in the listing office within this “next business day” time period. Sales associates share the wants and needs of their potential buyers, despite the separation of information required by new agency laws. So when an attractive home becomes available, associates in the listing office typically have the first shot at selling it.
What is your opinion? Should agents be able to compete to purchase a home the first day it hits the market? If not, when? Should first-time buyers be given priority over investors? Agents? We will print your answers in a future column.
Tom Kelly is a former real estate editor for the Seattle Times. He can be reached at boomerwriter@ gmail.com or P.O. Box 4719, Rolling Bay, WA 98061.