Competing with ‘nepo babies’ as well as cash offers
Published Date 3/8/2024
“Failure to launch” is an unfair slight to today’s younger first-time homebuyers. It’s obvious many want a home and have worked hard to earn the privilege of buying one. With prices continuing to rise and interest rates not abating enough to make homeownership any easier, they must compete with cash buyers as well as one other maddening demographic: those with parents who throw money at them to buy. Realtor.com’s Lisa Marie Conklin refers to them as “The Bank of Mom and Dad.”
“Parents either buy outright for the kids, co-purchase, or assist with down payment or closing costs,” says New York City-based Realtor Nicole Beauchamp.
But what if you’re not the offspring of parents willing to bankroll you? It can be downright discouraging when your family isn’t that flush with money and you find yourself on your own competing against “nepo homebuyers.”
Conklin wants you to know that nepo homebuyers don’t necessarily have it made. “They still have to meet loan qualifications, such as income, credit score, debt-to-income ratio, and down payment requirements,” she says. She also says all the money in the world might not be enough to get the keys, depending on the kind of home they’re trying to buy.
“I do a lot of work with condo and co-op buyers who may have parents who want to assist in some way,” explains Beauchamp. “But it can be complicated as some buildings have different rules regarding co-purchasing. They may not allow parents to gift money toward the purchase or buy for their children.”
Another biggie to keep in mind: “Sometimes there are things other than price that can make a deal happen,” says Beauchamp.
What, you may ask, are those? For one, sellers might need a quick close of escrow. Perhaps the offer they made on another house relies on all the proceeds from the one they just sold. Or they might need to stay in their house after closing to accommodate the schedule of the seller of the house they are buying. How does this apply to you, competing against cash or nepo-baby offers? If you make your timeline coincide with the needs of the seller, they may be willing to take a lower offer. So knowing the seller’s specific needs is important when competing to buy a home.
Another is to use a pre-inspection to your advantage. In a typical transaction, inspections are ordered up by the buyer after a deal is struck. But if a pre-inspection was done, the findings might offer the seller a better grasp on the issues and cost of repairs. That can affect their pricing strategy as well as open up a negotiating window to which other buyers may not be privy. “If the house had a pre-inspection, base your offer on the understanding the house comes with these inherent issues that other buyers might want to avoid dealing with,” says Conklin. That means having the inspector rank the repairs, and then you, as the buyer, can prioritize them based on necessity. Like triage in an emergency room, address those repairs that need immediate attention first, then the ones that can be held off a while.
“If you make a speedy offer and are willing to take on the work, you’ll have a leg up on other buyers who want to haggle over repairs and the list price,” says Conklin.
Homebuyer assistance programs still exist. Research government or community-based programs can offer down payment assistance, grants, or low-interest loans for first-time homebuyers, assisting people in fulfilling their dream of owning a home. However, each program has specific requirements, and individuals must still meet loan qualifications.
But don’t be thrown off by the term “first-time home buyer.” You can still qualify if you or your spouse haven’t owned a home in three years or are recently divorced and have only owned a home jointly with a spouse.
Then there are government-sponsored affordable housing programs — like FHA loans that offer low down payment options and flexible eligibility requirements for qualified buyers. Veterans Affairs loans are a great option for veterans, service members, and eligible spouses. However, Wilson says that VA loans tend to be the most stringent regarding property requirements, while USDA loans offer similar conditions as an FHA loan and specifically target rural areas for low-income households.
And then there is that practice of making a special appeal to the seller — the one that outlines to them in a letter why their house already “feels like home.” The grace with which your Realtor helps you make an offer can sometimes appeal to a seller’s emotions. Perhaps the home you’re hoping to buy was their first as well. Babies started their lives there. Someone’s daughter glided down that staircase in her high school formal. Don’t discount the power of nostalgia when making an offer. Sometimes it just works.
Realtor, TBWS
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