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Digital Curb Appeal Drives Value in BTR

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Today’s Residents Have Higher Tech Expectations By Peter A. Gudmundsson In many industries outside of real estate, products and services evolve according to a technology adoption curve. This means that today’s luxuries become tomorrow’s must-have requirements, fast. Think air conditioning, power door locks on cars, wireless internet connectivity, or even home kitchen refrigeration as examples that started as novelties, became modern conveniences, and ultimately baseline prerequisites. Technology deployment in the Build to Rent (“BTR”) space is experiencing that same rapid evolution from exotic early adoption to “if it is missing they must have cut corners” judgments. BTR as a market provides two challenges that become opportunities when addressed with modern home management technology: The mastery of distances between units and operating processes for efficient management. The fast-growing convenience and efficiency expectations of today’s rental residents. Modern property management platform systems offer so much more than just independent smart locks, thermostats, and access control. While it is true that these are the building blocks of many adoptions, leaders in BTR and other sectors properly see these tools as only the beginning. The best lens for considering technology is to bifurcate consideration into what is best for the physical asset itself, that is to say the building and property, and what pertains to the people who live and work there. It is the unity of the physical asset and the operating processes in the context of superior resident experience that sets the best run properties apart. Asset Protection and Control Beginning with the hardware assets required to outfit the property, the earlier one considers technology considerations, the better. For example, smart devices like locks, thermostats, leak and noise detectors, lighting controls, and security equipment need not cost much more than their analog or “dumb” antecedents. In fact, many builders are relieved to learn that only a small incremental investment in hardware and devices over the sunk cost of incumbent hardware is required in many cases. When chosen carefully, today’s open software can work with many different manufacturers and models. Other providers will present hardware/software combinations that are elegant in their fusion but do not “play well with others.” Since optionality is critical, prudent builders will choose open software that will still be relevant when new hardware or software is acquired. Efficient Operations, Risk Mitigation, and Enhanced Revenue Managing and marketing BTR units can be labor and cost intensive. Centralized visibility and control at the unit level can save innumerable hours of work when it comes to managing a BTR property or property group. When all hardware is connected to a unified management system or dashboard, maintenance personnel, for example, can prioritize their routes and tasks based on real time activity rather than spot checking statuses of disparate systems throughout the development. On the marketing side, self-guided tour technology allows leasing personnel to focus on demand generation and lease closings rather than repetitive showings to prospective tenants who may only be kicking tires. Leaks are risk events that should be mitigated; not remediated. For as little as five dollars, a connected system inclusive of leak detectors alerts maintenance at the leak’s inception, helping to avoid water damage or mold. Regulations and common sense drive the deployment of smoke and heat detectors, but water, a greater risk than fire, should also be part of a mitigation plan. Some insurance underwriters will even offer financial incentives for integrated detection systems. Finally, the use of a modern property management platform solution allows the manager to not just save money through efficient operations but also generate incremental revenue through the assessment of a technology access fee to current and future renters. At all price levels, renters will not object to $25 to $50 of incremental monthly fees if they believe they enjoy state of the art technology access. Renter Experience and Expectations To state it bluntly, renters will judge your property if it lacks modern technology for access, security, energy, convenience, and insight. Remember, these are people with modern technology in their pockets, on their wrist, and in their cars. They will judge a new or old property as deficient if the technology base is not current. Think about how you react when you stay at a hotel where the WiFi connection is spotty or weak. Most make sweeping judgments that if the connectivity is poor, one must wonder what else is substandard. Residential property brands and locations are equally vulnerable to the expectations of today’s renters. A savvy renter wants to know that they will be able to moderate their energy usage from day one. They will want to turn on lights or grant access from far away or know if the noise level of their party is too loud before it triggers a visit from local law enforcement. A property that features up-to-date technology will offer “digital curb appeal” complementary to the additional investments made in landscaping and a friendly, professional leasing team. Marketing data shows that most renters seek community when choosing a home to rent. Community is an intangible concept, but most know it when they see it, and all agree that it begins with communication. This is why a property management platform needs to offer built-in communication that ties together the management of assets and processes. Has the gym access code changed? Will Taco Tuesday still occur at the pool if it rains? Will scheduled roof maintenance be moved to next week? Is the electric vehicle charging station available? These and more are the types of questions that residents need to be answered in real-time. Today’s residents have higher expectations for their rental residence, whether it is a studio apartment or single-family home. No longer will fresh paint and billboards suffice when it comes to attracting and retaining high quality residents. A well-run and technology enabled rental community will drive revenue, conserve costs, and provide the resident experience that will set your property apart. Whether a BTR investor intends to own and operate for the long haul or sell to another

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Boise, Idaho

The City of Trees Still Has Room to Grow By Carole VanSickle Ellis Boise, Idaho, has long been a center for travel and trade. Since the city’s founding in 1863 at the intersection of the Oregon Trail and trade routes connecting Idaho City and Silver City, it has played a central role as a meeting place for merchants and business operators. Today, Boise, also known as the City of Trees, is home to three Fortune 500 headquarters (Micron Technology, Boise Cascade, and Albertsons Companies), six colleges, and more than 749,000 residents with a population growing faster than all but one other metro area in the United States. Boise has made headlines for several years now thanks to that rapidly growing population. In the Realtor.com “Top Housing Markets for 2022” report published in January of this year, Realtor.com chief economist Danielle Hale noted a “concentrated influx” of residents streaming into Boise from West Coast cities including San Francisco and San Jose, California, in particular. “The strong local economy…attracts outsiders,” she observed, noting that Boise is particularly attractive to individuals seeking remote work opportunities and STEM (science, technology, engineering and mathematics)-related jobs, of which Boise has a slightly higher share than most other markets nationally (6.9 percent vs. 6.5 percent). Hale also pointed out Boise remains more affordable than comparable cities with its median asking prices just over $500,000 in late fall of 2021 compared to Seattle’s median asking price of about $767,000 and Silicon Valley’s median asking prices nearing $1 million. Relative Affordability and Inventory Thanks to relative affordability in Boise compared to the places from which many out-of-state buyers are moving, the city is likely to remain “hot” in 2022 despite already experiencing astronomical growth in 2019, 2020, and 2021. “We are still bringing so many more people in [than are moving out] and the people moving in have such a higher buying power than our locals,” observed local broker Brett Hughes in a December 2021 interview. Hughes said that inventory is the biggest stumbling block for anyone hoping to participate in the Boise boom because it is so difficult to access housing of any type. In December, inventory levels were actually up 150 percent year-over-year, but that simply meant that there was about one month’s supply of housing available for purchase. For comparison, “healthy” housing markets are generally considered to have between four and six months’ worth of inventory. Because of buyers’ much higher buying power compared to local buying power and the steady influx of new residents into the area, most local analysts agree that Boise has at least one more year of rampant growth before the market starts to cool – and more than that if the housing inventory can be increased during that time. However, not everyone agrees with this analysis. Professors at Florida Atlantic University and Florida International University published an article in December 2021 stating that Boise is, in reality, America’s “Number One Overvalued Housing Market.” These researchers calculated homebuyers paid a premium of 80.51 percent in 2021, followed by Austin, Texas; Ogden, Utah; Provo, Utah; and Phoenix, Arizona, with premiums of 50 percent or lower. The team predicted that a “pricing crown” would develop in their top-five overvalued markets in 2022 and, when that happened, home values would level off. Ken Johnson, a real estate economist at Florida Atlantic University and one of the authors of the study explained, “A crowning in prices is common when markets reach the peak of their current housing cycles. It does appear that several areas around the country are at an inflection point.” For investors considering acquiring assets in Boise, this information should not necessarily mean that they steer clear of the city until the inflection point hits. After all, many of the area’s newer residents are in a position to pay premium prices thanks to the sales of their own West Coast homes, and a city boasting more than 200 days of sunshine annually, low corporate and personal tax rates, a cost of living that is nearly 1 percent lower than the national level, and a vibrant arts community is likely a compelling place to get into a bidding war. The key to success will be predicting just how much of a premium those buyers will be willing to offer and for how long. Fix-and-flip projects and renovations on rentals should be budgeted and timed to get them to the market as quickly as possible in order to take advantage of current market conditions. Barron’s contributor and portfolio manager Ken Shinoda called Boise a “magical destination” and designated it a “Covid Metro” to which “homebuyers flocked…in expectation of living close to nature, free from the office.” However, he warned, some Covid metros are already showing signs of softness as “today’s world is calling people back to the office, at least part-time.” The key in a market like Boise will be to closely monitor trends in its West Coast “feeder markets” and react quickly if it appears that influx of high-powered buyers is starting to slow. “Easy, Non-Stop Access” in the Boise Valley Speaking of “back to the office,” one of the things that has made Boise so attractive to so many people from around the country is its proximity to many other 18- and 24-hour cities. The Boise Airport is located only about five miles from downtown Boise, plays host to more than 3 million travelers each year, and is not quite a five-hour flight away from New York City and just over four hours from Atlanta, Georgia. Boise is a tempting single hour from Spokane, Portland, Seattle, Salt Lake City, and Everett, Washington, and just two hours from Denver, Las Vegas, Los Angeles, Oakland, Palm Springs, Phoenix, San Diego, and San Jose. For those potential residents whose companies may be inclined to, as Shinoda described it, call employees back to the office in 2022 or 2023, Boise represents a good fit for once-weekly or -monthly commuters with the income or company funding to pay

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The Build-For-Rent Evolution

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Why BFR Communities Have Taken the U.S. Market by Storm By Mark Peterson As we head into 2022, the commercial real estate industry is continuing to see new Build-for-Rent (BFR) communities popping up all over the county. These BFR communities of newly-built detached or attached single-family rental homes have taken the U.S. market by storm in a few short years, helping to fill the immense housing shortage for renters and opening new revenue streams for builders and investors. There are 15 million households renting in the U.S., and current trends show we are turning into a nation of renters. Renters are allured to new single-family rentals for several reasons including the opportunity to have more living space with yards without having the responsibility of home ownership or having to produce a down payment. COVID-19 accelerated demographic changes, such as moving to suburban locations and working from home, escalating demand for BFR housing throughout the country. What happened in recent years to cause a surge of growth in Build-for-Rent? The BFR investment class reflects similarly to multi-family in its beginning phase. Institutional investors only comprised an estimated 2% of ownership in the 1970’s when multi-family got its start, which has grown to nearly 55% today. Looking deeper at the evolution of this booming asset class, key drivers – including agency financing, increased capital flowing into the asset class, optimization, technology and smart home advancements – have propelled BFR forward with the promise of massive growth for years to come. Breaking Through Financing Barriers One of the biggest challenges in BFR was the financing. Four years ago, BFR was not a proven asset class and it was challenging to convince builders that there were actually buyers interested in purchasing an entire community on a forward commitment. Back in the day, the top 20 SFR operators were just getting started with exploring or buying these BFR communities, and trying to convince these developers and builders that they would get a forward commitment from a big capital group that would commit to buying before the homes were built was a daunting task. Before the institutionalization of BFR these SFR operators were exploring the asset class because they realized their capital expenditures on these scattered homes were high and some of the inefficiencies that ran with managing homes scattered across an MSA would be overcome by buying homes that were all in one community. Fannie Mae and Freddie Mac provided financing on scattered home portfolios as a pilot program for each agency for a brief period. Each entity provided about $1B in debt, most of which was absorbed by the big capital groups to finance large acquisitions. This financing was not available for the BFR acquisitions. SFR experts, such as SVN | SFRhub Advisors, the first commercial single-family residential and Build-for-Rent dedicated brokerage in the country, were an integral part of working with the agencies on educating them on how BFR operates as it was an asset class they had not studied before. After years of studying BFR deals, Fannie Mae and Freddie Mac learned how a self-contained community operates even more efficiently than a multi-family community, increasing their interest in determining how to provide debt for the asset class. Working with preferred partners, such as Walker & Dunlop, underwriting criteria and programs were created to introduce to builders, developers and capital alike to provide acquisition financing. This evolved into programs for development debt along with vertical construction and bridge loan financing. Bridge loan financing allowed investors to acquire the homes at certificate of occupancy in tranches through the course of the build-out of the community that was then rolled into agency financing once the community was fully complete and leased. The permanent financing is the same debt programs the agencies use for multi-family financing and requires showing a trailing three-to-five-month history of occupancy and operations. This option did not become available until 2019 and was never fully marketed. It was a huge boom in pushing the BFR asset class forward as investors learned agency financing was available for self-contained BFR communities. With true agency debt now in place – arguably cheaper than the typical SFR private lending debt that was available – all the new capital comprised of commercial investors, multi-family buyers and single-family operators entered into the BFR playing field. Opportunities for Optimization At the time, buyers were primarily SFR groups, used to scattered lots, who were buying the first or the last 5% to 10% of a community and were not involved in the designing or developing of purpose-built communities. The builders would determine the floor plans and finishes in the homes leaving the buyer or investor to select from the limited options, or even standing spec inventory, resulting in suboptimal returns. Rather than having the ability to select finishes ideal for a rental unit, such as vinyl plank flooring, durable countertops and stainless steel appliances, these newly developed homes would include higher-end options you would find in a for-sale product. Builders of BFR communities are now purpose designing homes and selecting materials to withstand wear and tear to minimize repair and maintenance and turn-over costs, including laminate faux wood flooring, minimal carpet, seamless countertops and limited front/rear yard landscaping, according to John Burns Real Estate Consulting (JBREC). Lot size is far less important to renters, but community amenities offered in larger communities can be an important draw. Top desired amenities offered include on-site management and maintenance (61%), a pool (50%), a clubhouse (35%) and walking trails (31%), based on an analysis of JBREC Build-for-Rent database. Builders and developers now consult with industry leaders, such as SVN | SFRhub Advisors, to complete a conceptual analysis of every site to ensure builder savings and maximized returns. These experts will review nearly a dozen floor plans to evaluate what the returns per floor plan are in addition to researching the current market, MSA trends and characteristics, rental trends and demographic data. The importance of optimization cannot be overstated. The table below depicts an

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Build-to-Rent in a Brave New World

Global Real Estate Services Combines Personal Services and Technology for Investing Success from Start to Finish By Carole Vansickle Ellis Mike McMullen, founder and CEO of Birmingham-based Global Real Estate Services, started investing in real estate in 2002 at the behest of his accountant. “He asked me why I had so much money in the stock market when I knew nothing about it and suggested I work in what I know: real estate,” McMullen laughed. “So I started buying and managing investment properties.” While the humble beginnings of Global Real Estate Services, a family of companies that today covers all aspects of single-family residential real estate investing from building to renting to selling, sound relatively simple, McMullen’s operation did not stay simple or small for long. “When I got started, I was working with my wife on our own properties, but we eventually opened a rental management company, started selling to investors, and used the same formula we had used personally to build all of the companies in the Global Real Estate Services family,” McMullen explained. “We are the original build-to-rent company. We have been building a build-to-rent machine for nearly two decades at this point.” Global Real Estate Services consists of three companies: Prominence Homes, which specializes in “build-to-rent” single-family homes that both individual and institutional investors purchase as long-term rentals, America’s Rental Managers, which operates throughout the southeast and manages more than 1,500 doors for more than 1,000 real estate investors, and Mike McMullen & Associates, a real estate brokerage with clients in 24 states and across 17 countries. Despite its size, the company maintains a highly personalized relationship with every client. “We treat every property as if it is our own, so when you become a client, you are coming into a family,” McMullen explained. “We are very intent on listening to what the goals of the investor really are.” That close attention to investor goals has paid off, with some of McMullen’s earlier clients already achieving goals like retirement in their early 60s. “All they do is travel all the time and count their money – and that was their goal,” McMullen said proudly. “They wanted to be in a position to really enjoy retirement, and it was fun to be a part of that and know we helped make it happen.” A Southern Approach to Real Estate Perhaps one of the first things investors learn from McMullen about his operations is that he is intensely proud of his southern company and its southern heritage. Global Real Estate Services was founded in Birmingham, Alabama, and is actively building, acquiring, managing, and selling properties throughout the highly attractive southeastern region of the country. It is more than just location for McMullen, however. His “southern company” is a way of doing business. “We will travel the world for our investors,” he said, noting that he has flown more than 3 million miles in order to meet investors face-to-face and make sure he understands their financial goals. “We are southern people, so we want to see who you are. We want to enjoy working with you and for you to enjoy working with us,” he said. That determination to keep interactions personal was challenged in 2020 during the COVID-19 pandemic when many businesses like McMullen’s drew back, laid off workers, and did their best to take things “virtual” as the world shut down. McMullen, typically, went in the opposite direction with the full support of his executive team: Terri Nava, COO of America’s Rental Managers, Misty Glass, CFO of Prominence Homes, and Scott Underwood, chief development officer for Prominence Homes. “I pointed out to them we have never won by following what everybody else is doing and we decided to not change one thing [from a production standpoint],” McMullen said proudly. “We increased production 50 percent. We never changed our hours, and we never laid people off. It kept us all sane.” While Global Real Estate Services was willing to meet remotely with clients who wished to do so, no one who wanted a face-to-face meeting with McMullen was denied. That dedication and clarity of purpose paid off, and McMullen and his partners invested in a private jet so the team could travel without uncertainty about flights, changeable health policies, and the increasingly controversial hygiene theater that was taking over the country at that time. “It was a great decision because it enabled us to go into three more markets much more quickly than would have otherwise been possible because now I can get to those markets in a matter of 45 minutes on the plane. Everything comes with opportunity,” McMullen said. He added proudly, “Because we remained open and doubled down, we were able to meet client needs in terms of inventory and services while providing stability to our employees. There was no confusion or uncertainty about our companies. We were open and ready to meet investor needs. People always need a place to live – even in a pandemic.” Seizing Opportunities with Nerves of Steel One of the most important characteristics of the entire Global Real Estate Services family is a willingness to identify opportunities and then act expeditiously and decisively. In the wake of the housing crash in the mid-2000s, McMullen and Glass, who is his sister in addition to co-heading up Prominence Homes, began actively accumulating land. This enabled the company to ultimately get a huge head start on the build-to-rent trend – “We were build-to-rent before it even existed,” McMullen likes to say – and has also given them a huge advantage in today’s land-starved market. “We have a whole division headed by Scott Underwood, the third principal in Prominence Homes, dedicated to going out and finding land, so we are able to have between 200 and 400 lots in front of us every month,” McMCullen said. Glass noted that even as acquiring land has become more difficult, the company’s established relationships with bankers, developers, and other real estate and finance professionals enables

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Build-to-Rent Turns Stress Into Success

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Average Risk-Adjusted Annual Return for BTR Investments Now about 8% By Greg Godderidge Prior to the COVID-19 pandemic, the build-to-rent (BTR) model was quietly gaining ground across the country, fueled by a shortage of housing supply and increasing demand for single-family rentals (SFR). Still, it was not on the radar for most SFR investors. However, as the pandemic exacerbated the supply and demand imbalance throughout 2020 and 2021, the BTR market crossed into the mainstream. What Makes the Build-to-Rent Model Successful? While home ownership is at an all-time low, according to Harvard University, single-family home rentals are booming. More than a third (39%) of all rental properties in the United States are single-family homes – the highest percentage since 1965. The majority of this demand is driven by the millennial generation. According to the U.S. Census Bureau, approximately 65% of Americans under the age of 35 are renters. However, multifamily rentals in urban centers are losing favor with the millennial generation as the desire for more space to raise a family and work from home have shifted the preference to suburban single-family homes. The demand for single-family rentals to accommodate the lifestyle of modern millennial families has driven a new niche market: luxury single-family rental communities with amenities like pools, fitness centers, playgrounds and walking trails. Build-to-rent communities are on the rise to meet the surging demand. According to Census Bureau data, the number of single-family build-to-rent (SFBTR) construction starts set a new record during the third quarter of 2021. Over the past four quarters, 47,000 such SFBTR homes began construction, up more than 17% and over the 40,000 estimated SFBTR starts for the preceding four quarters. That figure doesn’t include single-family homes built for the purpose of selling to a SFR rental operator which some have estimated could be as high as an additional 30,000 homes.  Nonetheless, this surge in supply is not enough to satisfy demand for single family rental homes. While there are about 16 million SFR properties in the United States, another 13 million rental households are expected to be formed by 2030, according to the Urban Institute. An Obstacle Course for Developers Unfortunately, the BTR industry has not been immune to the challenges disrupting the rest of the real estate market. A confluence of factors from supply chain disruptions to labor shortages have made construction more difficult and more expensive over the past year. Not to mention, there is a shortage of available land in desirable areas for large communities to be built. First, developers must navigate the choppy waters of local government zoning and permitting. Next, they are up against major competition to acquire sizable tracts of land for BTR projects. According to market research firm Hunter Housing Economics, a site that is well-suited for a build-to-rent community will spark a bidding war of upwards of 10 and 25 offers. The hurdles don’t stop coming once they have buildable land. Transportation delays and port-capacity limits have throttled the flow of critical building materials such as paint, window units, garage doors, and appliances. Even individual shortages can upend entire construction schedules. The Wall Street Journal reports that freezing weather and power outages in Texas last year led to a critical shortage of resin which is used in many home-building products, sending ripples through the construction industry. On top of these disruptions, there is a persistent shortage of workers with the skills to build homes. The National Association of Home Builders (NAHB) estimates that there are 400,000 job openings in construction and that the industry as a whole needs to add 740,000 workers a year just to make up for retirements and the industry’s growth. Supply chain kinks and the lack of labor mean missed deadlines and higher costs. The housing-market research firm Zonda recently reported that about 90% of the home builders they surveyed were experiencing supply disruptions. That’s up from 75% of those surveyed in January 2021. As a consequence, construction timelines for many projects are increasing from the typical 8 months, and that can drive borrowing costs higher which can decrease profitability. The Federal Reserve Bank forecasts a slow easing of supply chain constraints in 2022 that should help home builders get back on schedule. In the meantime, Robert Dietz, the chief economist at NAHB forecasts that all single-family-home starts will grow by just 1% this year compared to 13% growth in 2020 and the 9% growth in 2021. An Optimistic View for the Future Despite the setbacks caused by pandemic-related disruptions to the build process, there are many reasons to expect long term growth and stability in the BTR market. Multiple trends are converging to drive and sustain demand for the foreseeable future. The housing shortage is expected to persist for years to come—especially for affordable homes—forcing SFR investors to create their own supply. According to Realtor.com, the gap between single-family home constructions and household formations grew from 3.84 million homes at the beginning of 2019 to 5.24 million homes as of June 2021. Demand for rentals will remain high from Millennials and the emerging Gen Z population. Student loan debt and lack of savings coupled with increasingly high home prices have meant many Millennials — even high earners — are priced out of the homebuyer market in many areas. Others simply prefer the financial and lifestyle flexibility that comes with renting. Money is flowing into the BTR market. Single-family homes built to rent are delivering strong returns to investors—the Wall Street Journal reported that average risk-adjusted annual return for built-to-rent investments is now about 8%. The bottom line is that unprecedented demand has turned SFRs and BTRs into attractive opportunity for investors with the ability to securitize thousands of disparate rental properties into high cash-flow producing assets. While developers may be stressed with the confluence of challenges thrown their way throughout the building process, they are rewarded with huge success in the end.

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Buying a Home at Auction

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Auction is Ray of Hope for Homebuyers Frustrated by Tight Housing Market By Miriam Moore In a market where bidding wars and soaring home prices have become the status quo, consumers — especially 25- to 40-year-old buyers — are embracing a broader range of homebuying options. Specifically, three out of four millennials and a majority of consumers across generations told ServiceLink through a recent consumer survey that they would consider buying a home at auction. And why not? The end of foreclosure moratoriums is expected to send many more homes to auction in 2022, bolstering inventory and offering consumers greater choice. Plus, those familiar with the process of buying at auction know it often results in cost and time savings. And finally, the move from in-person to virtual, well, everything since the COVID-19 pandemic began has made people more comfortable with the idea of buying a property sight unseen through digital means. It’s not at all surprising that homebuyers are expanding their field of play to the (virtual) courthouse steps. Following are some important takeaways from the Harris Poll survey commissioned by ServiceLink in the fourth quarter of 2021, which asked 3,000 U.S. consumers to share their insights into buying a home at auction and what they foresaw at that time for the 2022 real estate market. 75% of millennials would consider buying a home at auction — and they’re not the only ones Consumers across generations are warming to the idea of buying a home at auction, although at a different pace. The willingness of baby boomers (ages 57-75) to consider the auction option — 54% said they would — is much lower than their younger counterparts: millennials (ages 25-40), at 75%; Gen Zers (ages 18-24), at 66%; and Gen Xers (ages 41-56), at 65%. The fact that more than one in five millennials (21%) have already bought a home at auction demonstrates that they are beginning to put their money where their mouths are. Thirteen percent of the emerging Gen Z generation report that they have purchased homes at auction, more than twice the incidence of the older Gen X (6%) and baby boomer (4%) generations. The wide discrepancy between younger and older buyers’ acceptance of auction may reflect its evolving image. When baby boomers were buying their first homes, auction was often viewed as a solution for quickly disposing of distressed properties. Younger generations are seeing auction in a new light: Yes, distressed properties are part of it, but more often than not, homes are being sold at auction because the seller likes the idea of getting cash in hand quickly and avoiding long-term carrying costs. Price, speed and digital bidding tools fuel consumer enthusiasm Turns out speed and cost are also big motivators among buyers. Throw the digital aspect of today’s auction into the mix, and it becomes an extremely attractive option for younger generations as well as anyone else concerned with limiting their face-to-face exposure during the home-buying process. Seventy percent of survey respondents said that potential cost savings would motivate them to buy a home at auction; 57% said the same of a faster homebuying process. And more than half (55%) of millennials and 42% of consumers overall said the ability to bid online would motivate them to buy a home at auction. Remote bidding tools can make auctions more accessible, as travel is not necessary for participation. On the flip side, consumers shared some concerns about buying at auction. Not being able to see the home in-person prior to buying (66%) and not being able to get a professional inspection (62%) are factors that would stop them from buying at auction. Consumers are split on the 2022 market outlook It’s interesting to note what consumers expect to see in the housing market this year. Not quite half of those surveyed (45%) said they look for home prices to continue increasing in 2022; if the other 55% are in the market to buy, they may be unpleasantly surprised, as most of us in the industry look for continued, albeit slower, home-price growth. Freddie Mac’s October 15, 2021 quarterly forecast calls for a 2022 increase of 7%, compared with 16.9% in 2021. On the auction front, 39% of respondents expect an increase in foreclosed homes available for purchase in 2022. Again, while few sources have committed to actual numbers, there is widespread acknowledgment in the industry that the expiration of the CDC eviction moratorium, as well as state moratoriums, will push more homes to auction. As the ServiceLink research indicates, homebuyers will be prepared to pounce on those new opportunities. The door is open for lenders to provide education As more than a fourth (28%) of respondents were unaware that they had the option of buying a home at auction, lenders should recognize and leverage the opportunity to connect with homebuyers through auction education. They can not only make more buyers aware that auction is a viable option, but also offer more in-depth information about its benefits and drawbacks for those entertaining the idea of buying a home at auction. For example, lenders might share information and insights into: >          Where homebuyers can go to see home auction listings >          How buying at auction may save them time and money >          How some auctions require cash rather than financing >          The risks involved in buying a home without a professional inspection and/or sight unseen >          The importance of checking for liens and claims before bidding As the idea of buying a property at auction becomes more mainstream, we can expect to see more and more consumer activity in the auction space. There is great potential for homebuyers to fulfill their dreams of homeownership through auction, even in the midst of intense competition. That’s great news for the coming months as well as the future, as the real estate market continues evolving to meet the needs of emerging generations.

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