First Offer, Bidding Wars, and Sweat :)

12 Replies

Hello All,

This is just a  story of first steps for anyone out there interested in hearing about it from a new person.

One thing to note: This is very time consuming if you're really involved in the process as I was. My partner was the one with the finances, and I was handling the bulk of the process. 

3 nights of 5 hours of sleep from stress. It was nuts, but in the end you feel like you learned something. 

Thanks to the inspiration and advice from BP, and several other podcasts I've been listening to, my partner and I put an offer in for a house. We didn't get it but I look at it as the first step to getting in the right direction and breaking through "the wall".

I spent 1 year+ looking for a place, we finally got up the balls / courage to get on top of it and put in an offer in Washington.

Some tips for new people, my own opinions, that is from a lot of research and this experience:

* It's a hot market and honestly I feel like some places are overpriced and becoming absurd. I feel like a lot of hype from real estate agents is not helping the situation. At least in the more central areas. I live in San Francisco, my partner is in Washington and jeez, the prices are a bit silly in my mind, but so be it. I was like: "We're not even in the Bay, what the heck."

* Unless you want to fight, forget about the low-priced fancy places. We hit a steep bidding war. My partner and I are split, we want a nice place in a good location but at the same time, may want to "house hack" (he renting to his friend for a discount since they've been roommates for 5 yrs+)

* Remember taxes if you're pulling from stocks. My partner has a lot of stocks. When we came up with our down payment offer, we forgot to factor in the heaps and heaps of taxes

* Closing cost-- Rememebr this when thinking about the down. We didn't factor in the heap of money for this. ($10k according to our loan person.) Our real estate agent "didn't know" the closing cost which was a bit absurd. She told us to go to our loan officer, which makes sense but I'm not sure how I feel about that lack of insight and trying to avoid talking about it whatsoever. 

* Get your credit in order first. I was very fortunate to have good credit, but when you buy with another investor, if you're both signing the mortgage loan, they'll use the lowest one (figures). I am hoping very hard we can get his credit fixed in time for the next offer!

* Avoid taking out contingencies. I heard about this everywhere on many podcasts but you know what, if you're not comfortable, screw it. Don't let your agent persuade you otherwise. I took out a lot and you feel naked. Esp if you don't want to lose earnest money (the money you throw the towel in if you change your mind). 

* Pray. I don't know if you're religious, but you know what, I would recommend this. Hahaha. At a certain point, I would just pray the right thing happens. In a bidding war, who even knows what the sellers want. If it's meant to be for you, I feel it will happen if you've done the best you can. After the offer I looked at my bank account and was like "Oh man, this might be wayyyy too much of a down."

But yeah-- thanks to all who have been sharing their stories and tips.

Also! If you're a fellow BP user in Seattle, San Francisco, Spokane, or California would love to connect on your thoughts!


Cheers,

Alice

@Alice K.

Good story.  You have a good vibe.  Keep the momentum.

Frank

Great story and great tips Alice! Keep it up, great things come to those that work hard.

Alice, thanks for the good read.  I'll admit that I stopped sleeping as well when we started investing, and I can also say that after the first four years or so that settled down.  

We got in a bidding war once, and it was very stressful, and walking turned out to be our smart move too.

You are spot on that you cannot put too much energy into lining up the finances.  Knowing you have the funds and really demonstrating that you have the funds can be two different things with lots of learnings in getting from point A to point B.

Hopefully something even better will pop up soon.

@Alice K. Thank you for the insight on bidding process, you have some great points.  The important thing is that you started, good for you, keep it up! 

@Alice K.

Thanks for sharing your experience. I can relate to taking a long time to study and learn and then getting up the nerves "balls" to make the offers. I finally made my first purchase a few months ago and was also disappointed with the realtors lack of knowledge about closing costs too. My closing costs were around $6k and I was shocked. I guess we do not talk about those fees enough on BP. At least you actually took some action. I believe you learn so much more when you actually take action and go through the process of making the offer, qualifying for financing etc., you learn more than you would just reading about the process or listening to a podcast on the process. Wait until you actually get the deal accepted and have to screen tenants. Tenant selection and screening was the hardest part for me. Thanks for sharing your experience. Let us know how it turns out of you. 

Originally posted by @Alice K. :

Hello All,

This is just a  story of first steps for anyone out there interested in hearing about it from a new person.

One thing to note: This is very time consuming if you're really involved in the process as I was. My partner was the one with the finances, and I was handling the bulk of the process. 

3 nights of 5 hours of sleep from stress. It was nuts, but in the end you feel like you learned something. 

Thanks to the inspiration and advice from BP, and several other podcasts I've been listening to, my partner and I put an offer in for a house. We didn't get it but I look at it as the first step to getting in the right direction and breaking through "the wall".

I spent 1 year+ looking for a place, we finally got up the balls / courage to get on top of it and put in an offer in Washington.

Some tips for new people, my own opinions, that is from a lot of research and this experience:

* It's a hot market and honestly I feel like some places are overpriced and becoming absurd. I feel like a lot of hype from real estate agents is not helping the situation. At least in the more central areas. I live in San Francisco, my partner is in Washington and jeez, the prices are a bit silly in my mind, but so be it. I was like: "We're not even in the Bay, what the heck."

* Unless you want to fight, forget about the low-priced fancy places. We hit a steep bidding war. My partner and I are split, we want a nice place in a good location but at the same time, may want to "house hack" (he renting to his friend for a discount since they've been roommates for 5 yrs+)

* Remember taxes if you're pulling from stocks. My partner has a lot of stocks. When we came up with our down payment offer, we forgot to factor in the heaps and heaps of taxes

* Closing cost-- Rememebr this when thinking about the down. We didn't factor in the heap of money for this. ($10k according to our loan person.) Our real estate agent "didn't know" the closing cost which was a bit absurd. She told us to go to our loan officer, which makes sense but I'm not sure how I feel about that lack of insight and trying to avoid talking about it whatsoever. 

* Get your credit in order first. I was very fortunate to have good credit, but when you buy with another investor, if you're both signing the mortgage loan, they'll use the lowest one (figures). I am hoping very hard we can get his credit fixed in time for the next offer!

* Avoid taking out contingencies. I heard about this everywhere on many podcasts but you know what, if you're not comfortable, screw it. Don't let your agent persuade you otherwise. I took out a lot and you feel naked. Esp if you don't want to lose earnest money (the money you throw the towel in if you change your mind). 

* Pray. I don't know if you're religious, but you know what, I would recommend this. Hahaha. At a certain point, I would just pray the right thing happens. In a bidding war, who even knows what the sellers want. If it's meant to be for you, I feel it will happen if you've done the best you can. After the offer I looked at my bank account and was like "Oh man, this might be wayyyy too much of a down."

But yeah-- thanks to all who have been sharing their stories and tips.

Also! If you're a fellow BP user in Seattle, San Francisco, Spokane, or California would love to connect on your thoughts!


Cheers,

Alice

1 - What makes the prices Absurd?  Seattle is becoming more like San Francisco every year.  Our tech community has been here longer, and is more ingrained, and less volatile than San Francisco.  We don't have the high spiraling IPO crowd to make prices run up fast, our prices have been on a slow upward trajectory for more than a decade.  

2 - What's a low-priced fancy place? It seems to me that if you and your "partner" are not on the same page with your investment strategy ( are you buy and hold, house hackers, flippers) then you will be butting heads.  And will have bigger problems down the road as the investment ages.

3 - It strikes me as a flaw in thinking that you didn't calculate, or forgot the cost of money.  Whether it's hard money, proceeds from stock sales, or just FV of money, it's part of being an investor, sometimes we have to quell our emotions and take steps back, or drag our feet a little bit so that we take a look at different aspects of what it takes to do real estate.  

4 - Sounds like you found the wrong Agent.  I would have dropped my agent if they hadn't been able to estimate the closing costs.  Remember this a major investment and you want to have knowledgeable, smart people helping you out.  Kick this realtor to the curb, and find a great realtor, they will save you a lot of time and stress.

5 - Did you know about his credit before applying for the loans?  Has he taken steps to get it fixed?  Credit is a very big factor in getting loans, and this is sticking point for a lot of new investors.

6 - While taking out contingencies may sweeten your offer, it can be dangerous, but there are ways around this that are common.  For instance during the open house schedule an appointment and have your Home Inspector meet you there, it's becoming more and more common for this. 

I think your sharing of some of these key points is great!  And I've been told that often times I come across on these boards as "mean" I like to think of it as being direct, and trying to challenge you to think about what you are doing, for new investors that first transaction is hard and scary, and often takes awhile to pull the trigger.  It seems you stumbled on almost every point that new investors struggle with.  So now that you have been through the process, it sounds to me like you and your partner really need to get together and solve these problems, and move forward.  Remember this is a business, and to be successful you need to have a plan and roadmap.  

J. M. hosts some great meetups in San Francisco and Oakland with some fantastic Investors go there!  If your partner is in the Seattle Area, I host a meeting on the East Side every month.  Network, learn, experience, and get back out there and close a deal!

"Unless you want to fight, forget about the low-priced fancy places."

I definitely agree.

These are the kind of homes where the listing agent decided to price 100k below market to lure people in thinking it is an amazing deal.  

These are the kind of homes with offer deadlines created to stir a bidding war.  

These are likely homes that a real estate brokerage firm likes to call a "Hot Home."  

As an investor, how do we mitigate this risk?  At the right time, target special niches with creative value-add opportunities.

Thanks for sharing your experience, Alice.  Totally agreed that the market has gone quite nuts in terms of bids in popular areas.  I recently put in an offer for a property in the Bay Area, only to found out there were 26 competing bids with several all-cash offers mixed in.  My philosophy has been it doesn't hurt to make an offer, and sooner or later you may get lucky with one, and that's all you need.

Great advice! You touched on the most important topics that were key issues when I bought my first property, primary residence, now a rental home. The closing cost were a kicker for me. The breakdown of cost just blew my mind. Had to accept it to move forward with the purchase but it really rubbed me the wrong way. And prayer helped a great deal. Delays with multiple owners\titles not signed off during refinancing  in different states prolonged escrow so praying helped me get to sleep many many nights...Thanks so much for sharing and keep moving forward!

Thanks so much for the replies--

These mean a lot. So great that you're all experienced and the personal stories and additional pro-tips will be used!

@Troy Fisher : Definitely agree with everything you've mentioned. We've since been talking through our goals and I'm thinking we're nearing the same page now. I'll look the meetup you mentioned and go next time it's in town (or, next time I'm in Washington).
As for prices, I just find it "absurd" when I hear 200k places elsewhere. I do know it's a completely different story, but when I look at the quality, square footage, and other features, what you get around these parts is no where near middle of nowhere places. (It's all market though, just a thought that we could get a 1BD 1BA in SF for 1MM$ or a mansion elsewhere. Ah, real estate. Then again I'm from the woods, and don't feel like going back this second.)

@Hai G. I really like your idea. For now we just want a place to live, and eventually we want to hopefully rent it out. :) I'm also smiling about the prayer part. No one believes me! (haha) 

Cheers!

@Alice K. I'd like to chime in about the agent's knowledge of closing costs.  The reason they can't estimate them is because the bulk of them are costs involving your loan, and lenders vary WIDELY in costs.  Some have higher fees but lower interest rates.  Some give you a credit towards your closing costs, and there are no apparent fees, but then you have a higher rate.  So, there are way too many factors outside of the agent's control to give you any kind of estimation, and anyone who did would be an idiot. Your agent did the right thing by telling you to ask the lender. That's the go to person for closing cost estimation.  

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