Which comes first, the property or the funding?

Question

I'm sure this has been asked before and I apologize for the newbie question. How do I get a realtor to talk to me if I see an ad in the MLS I am interested in to buy as an investment if I don't have funding arranged. And how do i arrange funding if I don't have a property lined up yet. Most realtors seem to want proof of funds before they will even talk you. Most lenders want to know the particulars on a property before committing to funding. Maybe I am making this too complicated, I hope.

Bryan O. · Answer

If you're talking about using traditional funding, you submit your paperwork and they'll tell you your cap. Once you know which property you want, they give you a pre-approval letter to put in with your offer.

If you're talking about hard/private money, you need to find your lender and understand the amounts they fund and what kind of deals they are after so that you know their constraints.

THEN you find properties that match your criteria and your lender's.

Richard Balsam · Answer

Look at it this way...there is a difference between searching for properties "on market" and "off market". Most investors tend to find properties to invest "off market" and that's where we can find great deals- because the sellers either must sell now- or have properties that will not appraise and banks may not lend - due to a myriad of problems associated with the house. We do not need to show "proof of funds" - since we have alternative ways to find the money if the deal is good.

Now- regarding MLS properties, most are in decent shape ( yes - there are a quite a few in  poor condition, as-is,  REO properties, etc, but the majority of homes will be able to appraise somewhere near the asking price, with sellers requiring, and agents expecting, buyers that can afford the home. This is where agents ( if they are doing their job) will ask for a bank letter qualifying the buyer up to a certain amount (provided by a local bank). Otherwise, agents may be wasting their time showing higher priced homes to people that cannot afford those homes. (for example- why show $300K homes to someone that earns $50K/year - that sort of thing). So...back to your question.

You want to know if you must show a lending source ahead of looking at homes, and are looking on MLS for investment properties? How can an agent know you will be able to afford a certain home value- if you cannot show the agent you are pre-approved for a loan? Would this agent show you properties all over the town - not knowing this information? Local banks do this everyday. Speak to a loan officer and get a pre-approval letter ( usually not a guarantee that they will lend you funds- but at least it shows the agent you did your homework). The bank will need to see your income, credit score, etc - and should offer you a pre-approval letter up to a certain amount. This is what any agent would want to see...so it provides them with a starting point of home values. Of course- you are looking at investment properties - not full priced homes, and most likely you will shop the loan to any other company you want - but at least it got your foot in the door with an agent. Good luck!

Andrew Syrios · Answer

It's not really an either or question. If you have a great deal, you should be able to get the funding. At the same time, having a funding source lined up helps make getting great deals easier. I would look around for potential funding sources, be they banks or private lenders and try to get either a preapproval letter (from a bank) or at least build some rapport with a private lender so you can approach them quickly without having to start from scratch when you get a deal. But just because you don't have those things lined up doesn't mean you can't start looking for deals. You can always wholesale something after all.