A couple offered to buy our house and it made me cry. This wasn’t because they’d lobbed a low ball. Their bid, in fact, ran to nearly 15 percent over the asking price. What made me cry was the picture they’d sent of their baby—a brunette mite peering warily out from under a giant hair bow—plus the letter they’d written, addressing us as fellow parents and outright begging. Please sell us your house. We’ve lost out on seven houses already and the lease on our tiny apartment is almost up. We really want to have a second baby, but we can’t if we don’t get your house.
“This is emotional blackmail,” a much older friend said, when I told him about the picture and letter.
“It’s not,” I shot back, offended. “It’s probably just the truth.” As a millennial myself, albeit on the older end of the generation, I know firsthand how financial and housing constraints shape decisions about family size. We’d lost out on houses in our own search. We have a son about the same age as the child in the photo. I also dream of a second baby; the clock is running out on us, too. The bidders’ story hit home, so much so that, thereafter, our Realtor enforced a strict rule: no baby pictures. Still, the flood of offers and tear-jerking pleas kept coming.
Unless you’ve recently sold a starter home in a pleasant midsize city like ours—Richmond, Virginia—it may be difficult to understand how fierce the competition really is. Stories about the overheated housing market dominate the news, but living it provides greater insight and punch than the headlines deliver. Living it shows you the mechanisms that price out millennials in particular, and which may otherwise be hidden from view, because certain details of deals don’t get reported on Zillow or any other site that tracks everyday residential real-estate transactions.
Appraisal gaps are the biggie. Let’s say you want to buy a house. Most people understand this requires a down payment, typically 20 percent of the total purchase price. It’s a tall-enough order. But right now, to win a bidding war? You may need a lot more cash. The competition is so stiff that you may well have to offer above the house’s objective value, and you can’t borrow that excess amount. To limit their own financial risk, mortgage lenders generally won’t loan you more than a house is worth, as determined by a third-party appraiser. Enter the appraisal gap, i.e., a cash payment that makes up some or all of the difference between your purchase price and—as you’ve probably guessed by now—the house’s technical value.
You present the appraisal gap you’d be willing to pay as part of your overall offer, and in practice, this can mean you need another $50,000 or even $100,000 on hand beyond your down payment. Most people, no matter their age, don’t have that kind of money in the bank. Certainly most millennials don’t. Aged about 25 to about 40, millennials have had less time to accrue such wealth, and that’s before you start talking about the broader economic circumstances within which our generation has come of age.
That my husband and I found ourselves on the seller end of the transaction was just dumb luck, an advantage of less than a decade. We bought the house in 2015, paying a good bit under $200,000, because that was a thing you could do in Richmond then. It was a foreclosure that was being flipped by an unlikely duo, a cable guy and a dentist, neither of whom could claim professional contracting experience. They’d installed new floors and new windows, and remodeled the kitchen and bathrooms, putting in nicer finishes than more experienced flippers might. But at 1,500 square feet, with three bedrooms, the house remained modest. We even worried we might be overpaying. We were the only bidders, and we were pleased though hardly shocked when our below-asking-price offer was accepted.
At that time in our lives, influenced by the FIRE movement, which emphasizes aggressive saving and investing toward the goal of early retirement, we wanted flexibility above all, and a mortgage payment of just $624 a month provided a lot of freedom. Then, in 2020, we had a baby, and soon enough a stack of Little Golden Books threatened to bury us every time we opened the nursery door. We were both working from home; we needed more space or the whole place would blow. We found a spacious fixer-upper—pink trim, bordello chandeliers, the works—a few miles away, and competed to win that bidding war, finally securing for ourselves a house that’s a dead ringer for the set of an ’80s soap. It was time to move.
Cue the frenzy. We put our old house on the market on a Friday morning this past March, and by Sunday, we had 15 offers. These proved out every news story I’d seen the past year. The housing market is white-hot, with the heat concentrated in the low end of the market. Investment firms really are buying up single-family homes—we received an all-cash bid from one, sight unseen. People really are fleeing higher-cost-of-living cities for more affordable areas. About a third of the offers came from people leaving D.C., or at least attempting to.
Millennial buyers are desperate and acting like it, sending pleading letters to home sellers, their Realtors accompanying these letters with pleading emails: We ask that you please read my client’s personal letter. One young couple’s lender even sent a video message, pitching her clients and endlessly repeating their first names as if we were kidnappers who just needed to see them as human: Hi, I’m so-and-so, Zach and Kaitlyn’s lender. I want to tell you a little bit about Zach and Kaitlyn, because Zach and Kaitlyn are the sweetest people you will ever meet. Not only do Zach and Kaitlyn have many interesting hobbies, Zach and Kaitlyn are extremely qualified to take on this loan …
At first I felt flattered, like someone who’d been asked, and asked, and asked, to the prom. Soon I just felt heartsick, even though my own family obviously stood to benefit. The house held sentimental value for us. It was where we’d brought our baby home and where, in the dining room/office, I’d written my first book. It’s where a lordly neighborhood tom, a kind of feline Don Corleone, had come to us for help after being hit by a car, then moved in. It’s where we made friends at last with the cool neighbor often on his porch with his guitar and a beer. “Stop working so hard,” he’d call across the road. “Come hang out.” Everyone should have such a neighbor.
Was it worth 80 percent more money than when we’d bought it, though? In the intervening years, the neighborhood had drifted sideways, with school ratings falling and a fatal shooting at a grotty bar up the street. We’d put on a new roof, replaced the ancient water heater. But would the house actually appraise for what all these people were offering? We weren’t convinced, and if the appraisal didn’t come through, we might be forced to take a lower price or repeat the sales process over again. So in the most cold-blooded capitalist terms, the bidding came down to the highest offer price plus the greatest appraisal gap.
We might’ve accepted a slightly less favorable offer, say, from the parents who’d sent us the letter about their lease and desire for a second baby. We’re not unambivalent capitalists. The issue was that every would-be buyer seemed worthy: sweet gay newlyweds, one of them a teacher! Sweet straight newlyweds who, because in Richmond there’s never more than two degrees of separation, turned out to be friends of friends! A twentysomething woman bidding by herself!
Unsurprisingly, we did not come to a perfect solution over a weekend. Our personal dilemma solved itself when yet another bid and heartrending letter came in. This was the second offer that made me cry. It came from someone who’d overcome a number of barriers to become a homeowner, and the appraisal gap they offered was unlimited. The amount did not matter; they’d cover it. This meant that another couple who’d offered a $50,000 appraisal gap lost out. The combination of a moving story, a guarantee that we’d get the purchase price, and total emotional exhaustion decided us. We really didn’t want to read any more letters.
And then? No appraisal gap proved necessary at all. The house appraised for exactly what the buyer had offered: well over $300,000.
After we went to contract, I reread all the letters and copied the names from all the offer sheets, guiltily pasting them into Google. Then I lurked on the bidders’ Instagram and Facebook accounts, skimmed their wedding registries, and perused their reading lists on Goodreads. They were all adorable. They all seemed so nice. I shouldn’t have been surprised to discover for myself how everyone is deserving, while no one should have to be. That’s the whole U.S. housing problem, writ large.
It could be that the spring of 2022 emerges as a multiyear peak in American home prices—or of Americans moving, period. I know we didn’t sell the buyer a lemon, but whether they overpaid, in a short-term sense is unclear. It’s a comforting thought, knowing they mean to stay for years, and that they can definitely afford to. But what about everyone else?