First-time homebuyers are a key to the housing industry. Once they are able to get in the door, they enable the former first-timer to move up and so on. In a nutshell, first-time buyers help to keep the housing ladder moving.
What has skewed the traditional ladder is the cost of homes in many neighborhoods and the amount of cash needed as a down payment. So, I wasn’t surprised when I read the latest statistics about all-cash buyers, including investors, who had beaten out first-time homebuyers to a purchase.
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 in addition to the amount of money he needed to purchase and repair the home.
“I lost the place to another investor,” my friend said. “The buyer was a Realtor.”
This should not come as a big surprise. Data from the National Association of Realtors indicates 43 percent of Realtors had at least one investment property. NAR reported in October that it has 1,366,693 members and is the nation’s largest trade organization. Not all salespersons, however, are members of NAR. 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 homebuyers 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 homebuyer?
One program with a “first look” option for owner occupants is Fannie Mae’s HomePath. It offers consumers who are going to live in one of the agency’s foreclosed homes 20 days to make an offer without competition from investors.
The truth is most sellers might not care who is making the offer. Multiple-offer situations have dwindled, and sellers simply want a solid deal so they can move on. Rarely are new listings snapped up in the first hours on the market by an investor. However, it has happened and will continue to occur as investors are attracted to specific markets.
“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.”
I bring up the 48-hour idea because that is the approximate time frame in which an agent most often must submit a new listing to the multiple listing service. When an agent takes a new listing, most MLS guidelines require for the listing to be submitted to the “multiple” before 5 p.m. of the next business day.
Many real estate brokerages are members of multiple listing services. These multiples are large listings of all the properties available for sale in a specific area. When a seller signs a listing agreement to sell his 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 on 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. Or buying it.
I don’t think any agent directly involved with a buyer or seller should be a candidate to buy that listing. Restricting others would be unrealistic, including buyers with a pot of cash and no intention of being part of the neighborhood.
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