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Perusing some of the reader forums at the online real estate brokerage site Redfin.com I came across an interesting debate. Many investors are snapping up bank-owned homes with all-cash offers. Banks like all-cash offers because they are less risky than waiting for a buyer who needs a loan. The loan may not be approved. Or in the case of Federal Housing Administration (FHA) loans, the property may need repairs before the buyer can qualify.
In a string titled “All Cash offers can go to hell!!!” a reader named Westfoe had this to say:
“I’ve been looking for a house for the past 3 months. I’m approved Fha with 20% down. Almost every house that we think is about to go thru or that we are the highest bidder, there some cash only a-hole that snakes it from us!!! Am I the only one???
How about the Family’s that actually want to live at the house not rent it out for profit?”
Are investors who have the resources to pay cash being fair to families that just want to buy their own home? Is selling to investors in the best interest of the community? The term ‘pride of ownership’ gets used a lot in real estate circles. It means home owners take much better care of properties than tenants.
Elsewhere in the same string a reader argues that investors are playing a key role in getting us out of this crisis. They are getting problem assets off of bank balance sheets—freeing the banks up to make more loans. Demand from investors is also driving up home prices—critical to a recovery.
What do you think?
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.