STRATEGY
BUYERS
Hedging Against Hedge Funds IS DEATH OF THE MOM-AND-POP INVESTOR COMING?
by Lorraine Beato
e are in the last quarter of 2021 and properties are get-
ment: “We represent a buyer who owns several properties already in the neighborhood,” or “We repre- sent a buyer who owns 5,000 homes across metro-Atlanta.” In 48 hours, I had eight offers in hand – six from institutional or hedge fund buyers and two from tra- ditional buyers. All the institutional offers were at or above list price while the traditional buyers came in at $15-20k below list price, which in this market really made no sense. To give you a frame of reference, we listed $5,000 below the last high- est-sold comp. As much as my client wanted to sell to a traditional buyer and deal with a financing contin - gency, the traditional buyers just couldn’t compete and couldn’t come up in price. In the end, we chose one of the hedge funds to counter to and I simply told them that we have multiple offers and asked what’s the best they could do. They had already come in $5,000 above list price, and within 10 minutes of my asking the question, they came up another $5,000, so I sold it for $10,000 above list price, all cash, as-is. These large institutional buyers have so much capital to place that not only are they beating out traditional buyers but also smaller, individu- al mom and pop investors who buy one property at a time. How many investors do you know that would be willing to pay $10,000 or more over
W
ting scooped up right and left. Not only is there a shortage of inven- tory across most U.S. markets, but homebuyers and small investors are being pushed out of the mar- ket by hedge funds and institution- al buyers. Institutional buyers are everywhere, and they are buying up as much real estate as they can get their hands on! Not a week goes by where I am not getting an e-mail or text message from a hedge fund saying they’re buying 50-100 homes per month and asking if I have any- thing available. Add this to the fact that they are paying top dollar or above list price if a home is listed with a broker. Let me share a real-life sce - nario that I just experienced four weeks ago. I put a lovely 3-bedroom 2.5 bath home on the market for a former client of mine. It’s a great neighbor- hood with wonderful amenities and one of the more affordable subdi- visions in the area. I had sold this home to my client 13 years ago and they had outgrown the home. I listed the home and in less than six hours I had two offers, and in less than 24 hours I had four offers—all from institutional buyers. Every e-mail from the agents who represented these hedge funds or institutional buyers included a very similar state-
list price? Add to the mix the iBuyers like Offer Pad and Open Door who are paying at times $20-40,000 or more than the market comps, and who can compete with that? It’s quite frustrat- ing and deflating. So what can traditional buyers do? Is this the end of the mom-and- pop investor? How can they expand and survive? Well, I believe there’s at least two strategies they can deploy. Most institutional buyers
66 | think realty magazine :: december 2021
Made with FlippingBook Online newsletter