What a Winning Bid Looks like?

22 Replies

Hello all,

I am in Charlotte and have now been outbid six times in six months. I have tried offers with $20k over asking, guaranteed offers, guaranteed money over appraisal, and lately a combination of all of those. Every time the listing agent has said our offer was strong and there was nothing else the seller was looking for only to find out we were second fiddle (every time). I don’t know if I am extremely unlucky or just really good at putting in second best bids but every time we have been told the accepted offer was one the seller had to accept. I am assuming some of them have been cash, and even found out one offered $3k over appraisal as well as paid the listing agents commission (which was $22k) for a net of $25k over its value, yikes! If anyone can give me insight to what some winning bids look like I would be much appreciated! I am hoping I don’t have to keep playing second fiddle.

I am also wondering if it would be worth borrowing money from parents to be able to say I am putting in “cash offer” but not sure how that whole thing would work. Could I say it’s cash offer and show proof but then use a bank? Or say it’s cash offer use my parents money than get loan? Not sure how tax implications or logistics are on doing that so if you have any advice on that as well.

All help is much appreciated!!

Thanks!

Dang @Stephen Foltin , that sounds like a frustrating ordeal altogether!

First, I'd check to make sure your numbers still check out for buying.  It doesn't always make sense to buy, so it's worth mentioning.

Assuming it does still make sense then the second thing to check is this:  what number WORKS for you for each property?  Forget List Price.  Absolutely forget it!  It's a terrible guide for you but a good guide for other people.

For example:  if you are looking at a house listed at $250k then $50k seems absurd as a factor of the list price, but if $300k works for you for the home then it's YOUR right price.   The vast majority of people WOULDN'T offer that because it is 20% above list and people are anchored of the list price, but if you can do the work to really know your numbers and let them lead then you can know that you offered the right price, nevermind the outcome.

Stephen, it appears you're trying to force a deal. If you put in solid offers and still get outbid, that's a pretty strong indication the market is out of control and people are over-spending. Don't work yourself into a frenzy to pay top dollar. Stay patient, keep saving, and wait for the right thing to come along. Even better? Do the work to find a deal off-market where you can get it for a cheaper price without competition.

No, you should not make a "cash" offer and then change it to financing. That's dishonest. Sellers accept cash offers because they are easier and quicker to complete.

Stephen, I agree with @ Nathan G. that the market you're investing is out of control and people are over-spending. The last thing you want to do is over spend and have little to no equity at closing. Have you considered long distance investing?

@Stephen Foltin you're experiencing what a lot of other investors or homeowners are experiencing with limited inventory and higher prices. 

As @Will Fraser pointed out, make sure you know your MAX price. Never exceed your max price just to chase a deal. 

I would continue analyzing deals and making offers and eventually you'll find the right one. You can also find ways to look for off-market deals. There will be less competition and they are usually priced lower than on market deals. 

A few things sellers prefer include: price, cash (instead of financing), waive inspection, short time to close (15-30 days).

Definitely do not offer cash and then switch to financing. That's a good way to lose a deal and your credibility. 

You can borrow cash from your parents or other investors and then do a cash out refinance after closing the deal, similar to the BRRRR method. Let's say you have the money for 25% down and you borrow the remaining 75% from your parents. After close you finance with a lender and pull out 75% cash and repay your parents (hopefully with some interest). Be aware of "seasoning" requirements from lenders. It's typical for a 6-month seasoning period, meaning you have to own the property for at least 6 months before they will provide financing. You can find lenders with 0-3 months seasoning.

these are Wild times we live in for sure.

We are seeing one in four acceptance rates for powerful offers.

patience , perseverance and emotional control will be key to riding thru this.

We have seen rephrasing of standard language that means the exact same thing work for sellers accepting offers.

Not deceptive just creative marketing that worked for sellers psychology.

@Stephen Foltin

In regards to your question about paying cash and then converting it to financing, yes you can do this, but obviously you need to close with cash. It's called a "recoup loan" or "delayed financing." Its similar to a "cash out refinance" but some banks have different rates for it, and call it something different. Wells Fargo has a 60 day from close deadline for a recoup. Another bank I'm working with has a 6 month deadline. LTV IS 75%.

I just closed last week on a property that I put in a cash offer, which was accepted.  The cash offer was put together from different sources personal/family, with the understanding that once I refinance that they would get paid back.  The ability to put in a cash offer was amazing, and I’m sure it put us in a select group at the top of the offers.  My first cash offer, and probably not my last!




Originally posted by @Gabe Tao :

@Stephen Foltin

In regards to your question about paying cash and then converting it to financing, yes you can do this, but obviously you need to close with cash. It's called a "recoup loan" or "delayed financing." Its similar to a "cash out refinance" but some banks have different rates for it, and call it something different. Wells Fargo has a 60 day from close deadline for a recoup. Another bank I'm working with has a 6 month deadline. LTV IS 75%.

I just closed last week on a property that I put in a cash offer, which was accepted.  The cash offer was put together from different sources personal/family, with the understanding that once I refinance that they would get paid back.  The ability to put in a cash offer was amazing, and I’m sure it put us in a select group at the top of the offers.  My first cash offer, and probably not my last!

Very interesting, Gabe!  I've already emailed my lender to say "DUDE LET'S DO THIS!" using this strategy.  Thanks for sharing!

 

@Stephen Foltin : you are not alone. It’s a crazy hot market!

As several others have said, don’t chase the deal. Forget the list price. It doesn’t mean anything. Make an offer that makes the numbers work for you. Build a little upside buffer, so if they come back and ask you for a better offer, you have some room.

The bidding process is designed to bring out the worst among bidders. It’s designed to make emotions (greed, pride, ego) overrule rationality. Don’t give in. Determine your walk away number and stick to it. If they ask for more than that, walk away.

The right one will come your way!

Good luck!

The market is way over heated. Likely just not the right time to invest. Sounds like you're so eager for a deal that you're willing to over spend. If you're not paying in cash then you're probably just not competitive enough.

Some people say that it's always possible to find a good deal. That's true, but the market conditions can make it much harder to find a good deal. 

@Stephen Foltin

1) A higher deposit may indicate to the seller that you have high confidence in your financing.

2) Waiving part of the inspections that you have checked during the showing and are comfortable with could help. This can be very specific or follow the outlined inspection categories seen in a typical contract. As you walk more properties with agents and inspectors, and better understand your numbers you may feel at ease waiving certain aspects of the home inspection.

3) Finally an escalation clause allows you to offer low but have the security of escalating up to your max price. Talk with your realtor about this addendum.

Ultimately emotion is a double edged sword that can cause you to buy or not buy for the wrong reasons. Stick to the numbers and have fun.

Hey Steven you can always do delayed financing on the home. The loan is treated as a cash out refinance, so the rate is not as competative as financing the initial transaction. But if the numbers make sense then they make sense

@Stephen Foltin the Charlotte Market Is insane right now.

It sounds like you’re doing all the things right with appraisal gaps, over asking, short DD etc to try and compete.

However, have you considered the escalation clause? It’s a clause that you can add into your offer stating you will offer 1,000$ over all other offers up until X (the max amount your willing to pay). Find your max that you’re willing to offer still in good conscience and go from there. If you’re coming in second every time this just might be the answer!

It’s practically the only way my clients are having success here. Good luck!

Real Estate Rockstars podcast on Feb 24th covers this issue well. It's titled "SOTM 68, How to Get Buyers' Offers Accepted Right Now". They cover this hot market and what agents are doing to beat the other offers. It's not always money and cash offers that win, give it a listen. Good luck.

@Will Fraser

Just a heads up. Both Wells Fargo and another broker both confirmed to me today that gift funds cannot be recouped with delayed financing. They will only loan the amount from the owners’ assets. Even with gift letters. You could season it first, but instead of 2 months, WF requires 6 months.

Different than what I was expecting. Just goes to show, the internet only knows so much. Haha! I’m probably just going to wait until 6 months and do a conventional cash out refi.

Originally posted by @Gabe Tao :

@Will Fraser

Just a heads up. Both Wells Fargo and another broker both confirmed to me today that gift funds cannot be recouped with delayed financing. They will only loan the amount from the owners’ assets. Even with gift letters. You could season it first, but instead of 2 months, WF requires 6 months.

Different than what I was expecting. Just goes to show, the internet only knows so much. Haha! I’m probably just going to wait until 6 months and do a conventional cash out refi.

Thanks for sharing this update, Gabe!  So much of this multi-step discovery process in the financial space feels like a bait-and-switch.  I'm pretty sure we had some major legal clarifications about that a decade ago, but here we are again 😂