How to make an FHA offer more attractive in Chicago?

Question

Hi BP!

Basically, I've put in offers for two multi-family properties in Chicago. One was in Logan Square, one in Irving Park. Both offers lost to other offers. In one case, the seller disclosed that he had accepted a cash offer, which beats my FHA offer. Fine. In the second case, I got no context at all. In neither case was I offered the opportunity to come up in price. I think people are scared of FHA financing contingency and inspections.

My question to you knowledgeable and experienced sellers is this: is there something I can do, as an FHA buyer, to make my offer look more attractive? Has anyone had success buying with FHA in a hot market, like Avondale, Humboldt Park, Pilsen, Irving Park, Logan Square are today in Chicago?

Brie Schmidt · Answer

The problem is most seller's agents have had a bad experience in the past with FHA or have a lack of knowledge on the FHA process. As an agent, I spend a lot for time trying to educate the other agent on FHA as most of my buyer's are using a FHA loan. Most of the time nothing comes out of it as they have multiple offers and can pick and choose from then.

Once I was able to turn the agent around and take my client's offer. I had to really sell him on the actual FHA process and we agreed to order the appraisal/inspection on the first day we went under contract, so if it wasn't going to go through the seller would know in a week vs the usual 3 weeks until that is completed.

@Nicholas Pascullo

Nicholas Pascullo · Answer

Thanks @Brie Schmidt @Crystal Smith @Max Tanenbaum for the great advice. Coincidentally I had an offer accepted shortly after making this post!

Crystal Smith · Answer

My recommendations:

• Ensure the letter you have is a real approval letter, not contingent on the lender needing any more information on you. The only contingency would be appraisal of the property & clear title. Some FHA buyers have weak pre-approval letters that suggest that they as an individual still have not completed underwriting.
• Consider increasing your EMD; Show your serious
• If the property qualifies for FHA & you've done your due diligence upfront then work w/ your lender & agent to reduce the process time; i.e. shorter inspection time; order the appraisal on the day the contract is accepted. Do whatever you can to reduce your number of days to close. The benefit of the cash offer is being able to close fast (2 weeks or less).

We have some clients who have submitted offers accompanied w/ a personal letter. I can say as a seller a personal letter has never swayed me, but it does sway some sellers when reviewing competing offers.

Brie Schmidt · Answer

The problem I see as an agent is when I bring up that my client has FHA financing they start ranting about the FHA inspection being so strict, and that they are so picky, but they also think it is a separate inspection and not an appraiser who is approved to do FHA loans.

Wayne Brooks · Answer

Exactly as @Brie Schmidt suggested, do your due diligence to determine if the property will qualify, and be willing to do the appraisal up front. Also, get your lender to go through underwriting to the point where they can give you an actual DU report, not just a "preapproval", of which many are worthless. This may cost you a few bucks.

Max T. · Answer

Try a larger earnest money deposit.

That won't make your offer look better than a cash offer though.

How to make an FHA offer more attractive in Chicago?

How to make an FHA offer more attractive in Chicago?

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