Saving the American Dream of homeownership

It is not unusual for the average hardworking homeowner to lose a bid on a house because another buyer offered more than the asking price. What is different is a homebuyer losing a bid on a house multiple times because out-of-state investors are bringing billions of dollars in cash to the local housing market, undercutting the typical American family seeking a mortgage.

With about 99% of everyday households needing a mortgage to secure their new home, an unnerving statistic from a July 2021 Redfin study shows nearly one-third of U.S. home purchases in 2021 were bought with cash – a figure that is up from 25% in 2020 and growing.

Smart investors see the headlines about Huntsville’s flourishing economy and red-hot housing market, the booming job numbers, and high quality of life.

“Investors see North Alabama as an emerging market where housing prices have risen significantly, but they are not excessively high, yet,” said Amanda Howard of Amanda Howard Sotheby’s International Realty in Huntsville. “And if you are coming from New York City, Chicago, or Boston, homes in Alabama are significantly less than the same home in their own market.”

So, buying up homes in North Alabama is just smart investing, right?

Perhaps not when many Wall Street investors are motivated by their ability to turn as much local housing stock as they can accrue into rental properties, making them landlords over the American Dream of owning your own home.

Not when homebuyers are buying single-family homes in neighborhoods where investors can step in and buy up the remaining 50 homes in their neighborhood, turning it into a renter’s development.

According to Realtor.com, Memphis and Birmingham top the list of metros where investment buyers are focusing their attention, but Huntsville too is in their crosshairs.

However, local real estate agents, home builders and independent companies are fighting back on behalf of the local homebuyer. They have started by just saying, “No,” but other more robust programs have been implemented as well.

Amanda Howard said they have investors calling daily asking about purchasing a whole portfolio of homes. And realtors are not the only ones. These investors are approaching homebuilders with offers to take down 15 homes at a time at advanced pricing or preconstruction pricing.

“Back in 2019, builders would say, ‘Sure. We’ll sell you 10 right now,’” said Howard. “But as the pandemic persisted and the margins began to change in 2020, compounded by lumber and supply chain shortages in the construction market, that trend began increasing with more people looking to buy a large sum of homes.

“Our agents are good at qualifying these callers rather quickly to determine whether they are local, out of state, or out of the country,” Howard explained. “Builders too began standing up to them and putting a stop to their being allowed to buy homes en masse.”

“We are used to finding the right financing for our clients and a majority of them are still financed, but the numbers coming in with cash have been astounding to us,” said Howard. “First and foremost, we want to help our local homebuyers. The market is already tough as it is, and we like for people to have choices.”

One of the ways her agency is giving people more choices is with their Buy Before You List program.

Buy Before You List is for single family homeowners who want to sell a home and buy a home but can’t put their hands on the cash.

“We buy their home, knowing we can help them by moving them into their next home while they list their former home,” said Howard. “Other companies are collaborating across the country to do something similar to it, but we set our own parameters to safeguard ourselves while helping clients and excluding investors.”

Howard buys your existing home, providing you with cash to make an offer on another home. Win the contract on your new home and move in before your old home is sold.

“It is heartbreaking for a family experiencing multiple offer situations to lose a home multiple times to a cash buyer,” said Howard. “We have multiple tactics in advising clients on how to win the home they want and Buy Before You List is one of those tools.”

The Buy Before You List program is similar to a national program called Home Partners of America. It too lets homebuyers buy a home and move in before their existing home is sold. The homebuyer enters into a short-term rental agreement on the new home, until the existing home is sold.

Last fall, Ribbon entered the Huntsville market in partnership with Crye-Leike Realtors. Ribbon is a real estate concept that gives everyday Alabama homebuyers a new competitive advantage by turning qualified homebuyer offers into cash offers.

Ribbon founder and CEO, Shaival Shah said investors are looking for markets with three recession-proof qualities: a military base, universities, and a strong hospital system. Huntsville fits the bill.

“I brought Ribbon to Huntsville because it is one of the fastest growing markets in the country right now and it is a place where Ribbon can step in and support everyday families, making them more competitive in the homebuying process,” Shah advised.

Ribbon gives agents a powerful tool called RibbonCash that helps everyday buyers compete in the most competitive market conditions, head-to-head with investors.

Zelda Freidman, a broker with Crye Leike said she was excited to see Ribbon come to Huntsville.

“The housing market is so competitive right now, anything that helps our buyers compete with cash offers is welcomed by all of our realtors,” Friedman said. “We are crazy busy with multiple offers and a lot of investors buying in Huntsville, making it really difficult for some buyers to be able to get their dream home.

“Once we submit your preapproval letter to Ribbon, it gives that homebuyer the advantage of making a cash offer. It is just that easy.”

“We believe in home ownership,” Shah said. “Ribbon has reconstructed the entire transaction in partnership with realtors and lenders so a family can secure their mortgage before or after they move into the new home. By adding Ribbon to an offer, the customers get an automatic upgrade to an all-cash offer with a guaranteed close.

“That moves you from the bottom of the stack to top of stack and gives you a 40 to 80 percent higher likelihood of winning the offer,” Shah said. “Once the offer has been accepted by the seller, if your mortgage isn’t ready in time or there are unavoidable delays, Ribbon steps in and buys the home and reserves it for you for up to six months, transferring the home to you at the original purchase price when your purchase closes.”