Frustrated homebuyers, sick of wrangling with cash-rich investors, sellers asking for the moon, and rising interest rates are turning their desperation into more aggressive home buying tactics to become homeowners. Recent research by online real estate marketplace Trulia, Inc. found that two out of three homebuyers would get aggressive to buy a home. Conducted between June 24 and 26, 2013, Trulia's Summer 2013 American Dream Survey, by Harris Interactive found younger buyers 18-34 would be even more aggressive then buyers overall. For example, 25 percent of those surveyed would offer to pay the seller's closing costs, but 30 percent of younger buyers would do so. Among all buyers, 25 percent would offer as much as five percent above the seller's asking price, while 31 percent of those 18-34 would do the same.
Residents versus Investors
Buyers are willing to be aggressive because they face a tough seller's market where quick-closing investors with cash have the financial clout to win bidding wars. RealtyTrac's Midyear 2013 Home Flipping Report documents 136,184 single family home flips in the first half of 2013, up 19 percent from a year ago and up 74 percent from the first half of 2011.
"We are hearing many stories of investors buying new homes, both in bulk and by pretending to be a real buyer in the new home sales office," said John Burns, CEO of John Burns Consulting.
While many reports point to declining investors, Burns said large institutional investors are still at it. Investment operations are concentrating in areas hit hardest by the housing downturn where there is still a supply of distressed properties to burn through.
Burns said the level of investor activity remains as high as 45 percent in markets such as Orlando, Florida. "We believe that thousands of organizations and individuals now have the capital and infrastructure to invest quickly, and we don't know what will shut it off," Burns said.
Younger Buyers Moving In
Meanwhile, mortgage rates have rolled back in the past couple of weeks ending July 25, but they remain a full percentage point above levels earlier this year and are expected to trend up, not down. This contributes to the urgency many buyers feel.
"Although buying a home is still much cheaper than renting, it’s a stressful time to be a homebuyer. Consumers are worried that mortgage rates and prices will keep rising before they buy, and many are willing to fight over the limited number of homes for sale,” said Jed Kolko, Trulia’s chief economist.
Also, within the ranks of first time buyers, younger frustrated buyers will put up a bigger fight. "Watch out if a Millennial wants the home you’re bidding on. They’re more willing than their parents’ generation to outbid, borrow, or make a personal plea to get the house they want,” said Kolko.
The Fight for Homes: It's On!
Here are other interesting survey results from Trulia.
Among all buyers, 12 percent would borrow enough money from family or friends to amass 20 percent down, compared to 19 percent of Millennials.
Among all buyers, nine percent would bid up to ten percent above the asking price, compared to 12 percent of younger combatants.
Five percent of all buyers would bid more than ten percent above asking, compared to seven percent of Millennials.
Among all buyers, five percent would borrow enough money to make an all-cash offer, compared to eight percent of younger buyers.
Some eight percent of all buyers would remove all contingencies, compared to nine percent of younger buyers. Removing all contingencies might satisfy sellers, but frustrated buyers put their good faith deposit at risk if any part of the deal falls through because he or she can't deliver.
And 17 percent of all buyers would write a personal letter to the home's seller to make an emotional plea, compared to 23 percent of buyers 18-34.
Tread lightly with personal letters -- a couple who writes they are happily married with honor roll kids to a seller who is in the middle of divorce and has kids who are flunking out could get the ax.