Arizona is being purchased up by investors, and the public is feeling the strain.
But who are these investors buying up all the homes and why?
The iBuyer has been around for a while now, and a lot of sellers have benefited from them. They move in to an area and start paying market value for homes, when even cautious buyers are afraid to do so. Most iBuyers are trying to build their “inventory”, so they aren’t always doing a quick turn around of the homes they buy.
Some times the iBuyer will invest in paint and carpet, a little repairs here and there, and they’ve subtracted these expenses from the purchase when they acquired it.
They may put the home on the market quickly, but other times they may hold out for the market increase, or wait for a more strategic time to get the best bang for the buck.
Rental Investment Companies
The large portion of our current market (2022) consists of investors building their asset portfolios with rentals.
They look to buy average homes that attract a good rental price return.
These homes are often held by groups of investors as a portfolio investment, which they make monthly or quarterly income on.
This is a long term investment for them, so they are less concerned about the purchase price than those looking to flip homes. This can cause strong competition in the market.
We’ve all heard about the flippers out there. In a Sellers market, they are less prevalent than in a normal market.
They’re looking for outdated or dilapidated homes that they can improve and sell for a profit.
Most are looking to be able to flip homes within 30 days, ideally.
While buyers love walking in to freshly renovated homes, there can be a couple issues with these.
- The quality of craftsmanship going into some of the renovations may not be the best. Some flippers use cheap labor and take short cuts that may effect the new owner down the line.
- Disclosures are rarely made, despite the legal responsibility of the seller, and many will ask for the buyer to waive the disclosures. While waiving a disclosure document is legal, a seller cannot ask a buyer to waive their legal right to disclosure of material facts. You have the right to ask the questions.
- The idea behind a “flip” is to be quick about it. No one is making money on delays. Keep in mind if you’re buying a home with financing, some time restrictions may apply, depending on how long since the title has changed hands.
Wholesalers are typically, but not always, unlicensed buyer who purchase the assigning rights to a home. They’re goal is never to own the home themselves, but rather to buy the right to sell the home for a profit.
In todays market, they’re goal is to make a good $25,000 on a home, without ever buying it themselves.
How do they do this?
They typically go door to door asking the homeowners if they are willing to sell their property. In most cases the seller is willing to take this easy route because it means not having to market the home, pay for agent fees, stage or any other aspects that take time, money and effort. They trade ease for potential profits and the wholesalers are well aware.
They (wholesaler) then puts the home on the market with their equitable interest and find a buyer using networking techniques and some times, the MLS.
Once a buyer is acquired, they assign the agreement over to that buyer, with their “finders fee” tacked on to the original price and whoala.
The Average Savvy Buyer
The last type of investor may not be the big company at all. They might be the family next door looking to invest their money in something stable, like real estate. They may be looking to buy a rental home of their own to build their own portfolio, an short term rental for their own use and to make money while doing it. They may be looking to get a project house. They may also be looking to help out a friend or neighbor by taking a project home off their plate, and getting their hands dirty themselves.
The average buyer tends to not be the big guy that buyers are competing with. They don’t have deep pockets and they certainly aren’t looking to sink their funds into homes that won’t turn a profit.
In a truly sellers market, we see very few average buyers swooping in with the winning bids.
In most cases, your offer may simply be up against another average buyer that’s been trying to buy their dream home for some time as well, so do your research and make a decision on the level of risk you want to take. Remember that your agent is there to help guide and inform, but ultimately, the decision is your own.