1st Time Homebuyers, Blog
Where Cash is King, First Time Homebuyers are Going To Extremes
September 6, 2009 by 1 to 4 Plex · 1 Comment · Permalink ·
In order to secure their first home in advance of the impending deadline for receiving federal first time homebuyer assistance, San Fernando Valley buyers are being forced to take extreme measures. Why? The vast majority of suitable (i.e., affordable) properties are bank owned and are receiving many, many offers. Worse, a large number of these properties is ultimately being sold to all-cash offers from investors. Few first time homebuyers can compete in the dog-eat-dog world of all cash offers.
I recently was helping a first time home buyer looking for an affordable condo in the San Fernando Valley. My buyer had a FICO score over 750, steady employment, no loans (!), and downpayment money in the bank; he is technically the perfect candidate the Government had in mind when they allowed FHA loans for be written with as little as 3.5% down.
While the tax credit and FHA financing news is good, the reality on the ground is grim for first time homebuyers. My buyer was stymied in his initial attempts to secure a property using FHA financing for several reasons:
- As noted, most of the REO properties he wrote an offer on ended up selling to cash buyers, or at least those with substantial down payments.
- The FHA guidelines are pretty strict when it comes to appraising the property. The property has to be in decent shape, and, for instance, an illegally converted garage is a big “no-no”.
- Due to recently changed appraisal guidelines, appraisals are tending to be the conservative side, which means if you bid high (with multiple offers, you pretty much have to) and your offer is accepted (lucky you!), deals can fall by the wayside.
At the end of the day, my buyer had to go to an REDC auction. More about that adventure in my next post.
My specialty is identifying suitable properties for both investors and homebuyers in the Los Angeles area. I know that there are a lot of great opportunities at today's prices whether you are looking for a place to live, or seeking cash flow and/or potential long term appreciation. Since I am an active investor myself -- you can be assured that I am constantly scouring the market for great deals, and I know how to recognize what is a good deal when I see it. If you want to learn more about my real estate investment philosophy, and the way I prefer to work with clients, please check out my 
Excellent post! Naturally, I have found the same thing. However, sometimes even cash isn’t king. I have a client who has bid all cash on 3 separate foreclosed townhomes and lost each time to somebody else who is also bidding all cash. (I think the foreclosure agents have lots of buyers in their pockets…)