The Advantages of Owner Occupant Buyers vs Investors
The pendulum has finally swung in favor of owner occupant buyers vs investors in Sacramento. For years, first-time home buyers played second fiddle to investors. Losing out on offer after offer during multiple-offer situations. Investors often presented short closing time periods with cash or hard-money offers, and buyers struggled mightily to compete. When sellers considered, for example, a first-time home buyer using FHA financing and down payment assistance, they said no way, Jose.
It’s not that FHA loans are bad, but they do require certain repairs, no peeling paint, might have to clear a pest report. Not to mention, with down payment assistance, the qualifying is so restrictive that sometimes buyers who have been told they can buy find out they cannot. Not every lender qualifies buyers by closely scrutinizing finances. In fact, some just run the file through desktop underwriting and call it a day.
However, the good news in our new Sacramento real estate market — and make no mistake, this is a new market — is owner occupants rule. When it comes to choosing between an owner occupant buyer vs investors, sellers will often select the buyers who will move in.
For several reasons. First, an owner occupant, a person who will live in the property, often develops an emotional attachment to the home. When buyers are emotionally involved, they tend to overlook smaller defects and will forgive imperfections; whereas investors are typically more analytical. Second, an owner occupant is not trying to make the property “pencil” i.e. provide a specific rate of return on cash invested, like investors. And third, not every occupant feels they must underpay, so lowball offers are not as prevalent.
This attitude is especially apparent in probates and successor trustee sales. In these types of transactions, often there is a sense of loss for the person who died. Heirs want to do pono (right) by the deceased. When presented with owner occupant buyers vs investors, they will often take the buyer who has developed feelings for the home and will carry on an affection for the property. As compared to an investor who will strip it, flip it or turn it into a rental.
In fact, I just closed a sale like that yesterday. A client who moved to Abu Dhabi asked me to sell his father’s home in North Highlands. It didn’t take me long to figure out he needed a probate lawyer because he was the executor, so I referred him to a probate lawyer. This delayed listing the home for 4 months, but it also gave the seller time to clean it out.
First go-around we received four offers ranging from $150K to $180K from investors. We listed at $195,000. This meant I had to endure long conversations with well meaning buyer’s agents who tried in vain to persuade me that the home was priced too high for them. Well, my job is to maximize seller profit potential; it is not to appease guys who want a deal. We accepted a full-price offer from an owner occupant and got all the way to closing before the buyer canceled. Cold feet, I suspect.
No Sacramento Realtor likes selling a home twice and getting paid once, but it happens.
Second go-around we received another four offers. These ranged from $159K to $180K, with an FHA buyer at $190K who changed his mind, and then, YES, another buyer who offered $200K. Guess which was the owner occupant? The guy who offered $200K. We had a couple of small delays but we closed escrow yesterday at $200K.
The seller grew up in this home. The only home he ever knew as a child because his parents never moved. You can bet he is thrilled that another buyer will raise a family in his childhood home. 4275 Sloan Dr, North Highlands, CA 95660 closed escrow at $200,000 on October 30, 2018.