Finally, a chance for financed Buyers?

Cash buyers pull back, leaving field open to financed Buyers. So why aren’t they buying in droves?

 
It’s July 2012, and despite soaring temperatures, Buyers are dropping everything to get in the car to preview houses. No longer had the Nelson’s listed their Phoenix house at 9am on Thursday, then the response from their agent had been nearly unbelievable by noon.
 
Even by 6pm that evening, they’d received a handful of phone calls, 3 appointments to show, and 1 sight unseen offer. By the weekend, the house was in a bidding war between two cash Buyers, and numerous back up offers from financed offers. “The Agents representing the FHA buyers were doing anything they could to give their Buyers a fighting chance…” says their then Listing Agent. “Phone calls, texts, emails from their agent reiterating how much they loved the house, hand-written notes about how their kids would grow up in the house. One even tried to make me promise to keep him updated with every offer that came in and to give them the first right to up their offer. I couldn’t agree to that promise.”
 
At the end of the day, the cash offer took the cake. The Nelson’s couldn’t resist the appeal that an Investor brought to the table; little contingency, expedited closing, and no hassle or last minute fall outs due to financing, and, a price just as high as the financed offers. “It was a no brainer”, they said.
 
This left the financed Buyers in a routine they were used to; finding a home, rushing to see it, writing an offer, begging to have a dog in the race, and being turned down or overbid because they simply could not justify why a Seller should pick their offer vs a much cleaner transaction. “Concessions? Forget about it. Ask them to fix anything, no way. We did everything we could to be attractive to Sellers, but at the end of the day, we just couldn’t compete with price and speed of these cash buyers.” says a Tempe buyer that thought home hunting would be much simpler. “We wanted a place to call home”, he continues, “but that really didn’t matter I guess.” Him and his wife Tanya decided to wait until the frenzy cooled to try to buy at a later time. Now? “The same house we wanted is out of our price range now, so we are going to have to decide to adjust our wants or just keep renting.”
 
First Time Home Buyers Vs Investors
 
 

 

At one point, the amount of sales going to cash Buyers in Phoenix was an unprecedented 40%+, whether they were individual or large “corporate” Buyers. After the foreclosure aftermath, when the market seemed to finally stop it’s free fall, Investors ran back into the housing arena and bought with an urgency that caused a rapid increase in prices through 2013. But now, that’s all but disappeared; the stark difference shows that Investors feel the pinch on pricing, cash flow, and appreciation, and are no longer gobbling up properties.
 
Good for financed Buyers, right? Not necessarily. Sales in Phoenix-metro are down 9% since last year and the amount new listings is at the lowest count in 14 years for September. This does leave more negotiating room for Buyers, should they be able to find a house that suits their needs.
 
However, the bottom end of the market lacks in supply, that would otherwise be attracting first time home buyers. There’s also a surprising amount of Arizona homeowners that are still underwater, therefore limiting the amount of starter home inventory as well as move-up Buyers.
 
Plus, borrowers face other challenges. Like, getting a down payment together, funds for closing costs, and getting financed. Lending restrictions are tighter now, making it more difficult for anything other than A+ Buyers to get their banks stamp of approval.
 
With the amount of Investors that bought long-term rentals in the last few years, rentals are so prolific now it can be deterring for pickier Buyers. “I thought that home ownership would mean we’d be, like, in this special group”, says Kendra, a Buyer in the West valley. “But the places we can afford seem to be surrounded by renters. I’m not sure I want to be the ones on the block that are more invested in our house and neighborhood than the rest of the lot.”
 
When asked if they thought now was a good time to buy, and where they felt the market was, she simply replied “It’s the right time for us, we just need to get Sellers and our Lender to agree.”
 
Tracy (G+) is an Arizona Short Sale Realtor, Investor, Rehabber, and Foreclosure Expert.
 
She also is an avid blogger, vlogger, contributor to Real Estate Magazines, and hosts Real Estate Rescue, a show dedicated to the distressed property market.

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