Having Trouble Getting Offers Accepted
My husband and I are newbies to the real estate game. We have been putting in offers for numerous homes in hopes to wholesale them, but none of our offers have been accepted. We've put in about 15 offers so far. We have Proof of Funds letters (all from Coastal-Funding), $500 Earnest Money Deposits for each and, of course, the purchase agreements for each. What are we doing wrong. Any tips?
What sort of properties are making these offers on? What sort of contingencies are in the offers?
Different strokes for different folks = different people and areas have different success rates with offer acceptance.
Some people say they get "all" of their offers accepted (at least I read one post in the BP forums where somebody made a claim along those lines).
Some people say they get 1 in 10 offers accepted, some 1 in 20, some 1 in 40 - so this can be all over the map. Number of your offers at 15 is still too little data to measure. You could get to 1 in 20 by having 38 offers rejected and then numbers 39 and 40 get accepted.
Elements of the MAO (Maximum Acceptable Offer) formula are:
* Some percentage (.6, .65, and .7 get used by various folks) - this is something you pick, but you do this based on how your buyer will buy.
* ARV (After Repair Value) - how you get to this number could vary. Are you using MLS comps, or online valuations? And how well you interpret those numbers ends up playing a factor.
* Repairs needed. Do you get a contractor's estimate? Are you thorough? Are you using your own repair numbers and are they off?
* Your profit that you seek to take.
You will have to evaluate those aspects, plug numbers into your formula, and that's what works for you.
I looked up Coastal-Funding and if anyone googles them there not going to see it as a serious proof of funds. Try to get a proof of funds from a more established Bank rather than an automated proof of funds from a website. $500 EM is very low in my area maybe not in yours. Banks take you more serious when you are willing to put up $5,000. It also always helps a lot to work directly with the agent that is listing the home that you want. I'm not sure about your broker agreements that you may be in but if this is an option I would definitely look into it. Trust me that agent would rather have both sides of the commission than just one and will help you out to get you in that home. We send out about 50 offers a week and maybe lock up 2 homes if were lucky. Of course we are trying to steal the ones we get so our numbers are probably a lot worst than most investors. I wouldn't worry about the 15 offers I would just say make some changes see what works in your areas and keep trying. Good Luck.
Originally posted by Jon Holdman:
What sort of properties are making these offers on? What sort of contingencies are in the offers?
Hi Jon - we're making offers on 3+ bedroom homes w/ basements in Oakland County, MI. The only contingencies we have in the offers are that the offer is contingent upon our partner's approval w/in 14 days of seller's acceptance. The other is that we have the right to assign our interest in the deal.
Originally posted by Steve Babiak:
Different strokes for different folks = different people and areas have different success rates with offer acceptance.
Some people say they get "all" of their offers accepted (at least I read one post in the BP forums where somebody made a claim along those lines).
Some people say they get 1 in 10 offers accepted, some 1 in 20, some 1 in 40 - so this can be all over the map. Number of your offers at 15 is still too little data to measure. You could get to 1 in 20 by having 38 offers rejected and then numbers 39 and 40 get accepted.
Elements of the MAO (Maximum Acceptable Offer) formula are:
* Some percentage (.6, .65, and .7 get used by various folks) - this is something you pick, but you do this based on how your buyer will buy.
* ARV (After Repair Value) - how you get to this number could vary. Are you using MLS comps, or online valuations? And how well you interpret those numbers ends up playing a factor.
* Repairs needed. Do you get a contractor's estimate? Are you thorough? Are you using your own repair numbers and are they off?
* Your profit that you seek to take.
You will have to evaluate those aspects, plug numbers into your formula, and that's what works for you.
Thanks so much, Steve!. We currently use a 65% formula, but it isn't getting us very far. I'm thinking about increasing it to 70%. We're using MLS comps to determine the ARV. As it stands right now, we're using our own repair numbers, as we don't have a contractor to go on viewings with us, yet (we're new to the area). Lastly, we have not been calculating the profit we seek in to the formula. Our coach we've been working with mentioned that wasn't necessary, as our offer will end up being way too low, but the more I read, the more I see people saying it's vital.
Originally posted by Bryan Balk:
I looked up Coastal-Funding and if anyone googles them there not going to see it as a serious proof of funds. Try to get a proof of funds from a more established Bank rather than an automated proof of funds from a website. $500 EM is very low in my area maybe not in yours. Banks take you more serious when you are willing to put up $5,000. It also always helps a lot to work directly with the agent that is listing the home that you want. I'm not sure about your broker agreements that you may be in but if this is an option I would definitely look into it. Trust me that agent would rather have both sides of the commission than just one and will help you out to get you in that home. We send out about 50 offers a week and maybe lock up 2 homes if were lucky. Of course we are trying to steal the ones we get so our numbers are probably a lot worst than most investors. I wouldn't worry about the 15 offers I would just say make some changes see what works in your areas and keep trying. Good Luck.
Thanks for the advice! How do we ask banks for a Proof of Funds letter? (sorry if that's a dumb question - we are REALLY new to this). We don't have the funds laying in our bank account as it is now. Unless we apply for a home loan, I don't see how an established bank will provide POF to us. Are there any additional ways to get legitimate POF letters?
Giving the agent both side's of the commission can sometimes work in your favor. If you already know what you're doing, call the listing agent up and put the offer through him/her.
Also, I do recommend a stronger funding letter. If you are writing an offer for 20k with 14 day inspection while another investor writes an offer for 19k, no inspections, and POF showing cash funds, the lower offer may win it. I've seen it happen over and over again.
Are these REO's that you are making offers on? If they are, you can forget about writing any more offers the way you are because banks won't let you assign purchase contracts (although there are ways around that). In addition to that, the "partner approval" contingency makes the offer look really weak. I'd be surprised if they even consider your offer at all. If you are just starting out, I would not recommend trying to wholesale REO's. That's a different ballgame than regular wholesaling.
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Contractor
- First Property Management
That wasn't really my question. Brian hit is. Are these REO's or short sales where its a bank that has to do the approving? Coastal funding gives those POF letters to anyone who fills out a form on their web site (according to other posters), so the bank is going to know its worthless. The "partner's approval" contingency is a bogus one. Its a mark of a newbie investor who is unsure about the offer and wants an out. If you request the right to assign the offer any bank is going to chuck your offer in the trash.
Sounds like you're trying to wholesale. These terms might get accepted by an individual seller. They're not going to be accepted on a REO or short sale. What offers are getting accepted on REOs? All cash offers with no contingencies and a bank statement showing cash in the bank.
You get a POF by either having proof you have cash in the bank (and a large - 20% or more earnest money check) or having a loan approval letter from a real lender or mortgage broker. One the seller can verify has some teeth behind it.
Sorry, but if you coach is having you chase REOs with POF letters like you have and these crazy terms in the offers then I think you need to consider what value that coach really offers.
I would also call into question the advice you've been receiving from your coach. In addition to that, who is submitting your offers for you? Even if you are submitting through the listing agent (which would be wise), they should be telling you that you are writing up some pretty weak offers. It's hard for me to imagine that an experienced REO broker would let you waste his or her time by writing up offers in that fashion. I don't mean to come across so bluntly so if these are not REO's or shorts, please clarify that for us.
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Contractor
- First Property Management
Originally posted by Brian Levredge:
I would also call into question the advice you've been receiving from your coach. In addition to that, who is submitting your offers for you? Even if you are submitting through the listing agent (which would be wise), they should be telling you that you are writing up some pretty weak offers. It's hard for me to imagine that an experienced REO broker would let you waste his or her time by writing up offers in that fashion. I don't mean to come across so bluntly so if these are not REO's or shorts, please clarify that for us.
Hi these are indeed REOs, which we are attempting to wholesale. It sounds like our coach may be a quack. I'm really glad I posted this thread, because I was getting really disappointed in our results - I knew something had to be wrong.
Question - we don't have the funds sitting on the bank to support the full cost of a house we're hoping to wholesale. How do we get a legit POF from a bank without the sufficient funds to support?
Apologies if these questions come across as very naive, but as I said, we are JUST starting this process and have a LOT to learn, so I truly appreciate everyone's help.
We were also told we need an exit clause (hence, the partner's approval) and an assignment clause (b/c we are going to assign the property to another investor once we close the wholesale deal). From what I'm reading here, it sounds like that's not the case either? If not, how does one ensure they don't get stuck with a home if the other investor backs out?
Do not try to wholesale REO's if you are just starting out. I'm going to list a few reasons why.
- You can not assign a bank PSA (Purchase and Sale Agreement) by simply writing "and or assigns" next to your name on the agreement. Furthermore, the bank will have you sign an addendum that supersedes the PSA and is very one sided in the banks favor. There is language specifically prohibiting you from assigning in the addendum.
- The cost of entry in REO wholesaling is much higher. Depending on the cost of the house, they may want several thousand, or more, as an Earnest Money Deposit. Given that you won't be able to give yourself an out in the contract, besides the inspection period, which is usually within the first seven days, you stand to lose that money if you can't perform.
- No bank or traditional lender is going to give you a POF if you don't have the money to purchase yourself. I've actually done Transactional Lending for wholesalers (I don't give a POF) and I don't release funds until the C buyer is in place with a signed contract, and their money ready to go in escrow. Basically, you need to have your buyer already lined up.
If you are just starting wholesaling, I would suggest finding homes that are not REO's to wholesale. You can in fact do this with much less money out of pocket and a much lower level of frustration. I would highly suggest reading through the wholesaling forum here on BP as there is a ton of great, free info in it. I would also suggest firing your coach. From the sound of it, he's never wholesaled a house in his life and shouldn't be giving you advice if he hasn't done A LOT of these.
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Contractor
- First Property Management
In addition to what Brian wrote above about not starting with REOs, many if the REO sales these days are through Fannie Mae, and in most cases they will restrict the sale for 90 days after purchase, so wholesaling is more difficult.
I write every offer jeff koenig or his assigns and have not had problems. I need to be able to put it straight into an LLC but my POF or bank statement is in my personal name. I do not set up an LLC before I have the property under contract. I agree with everything else, but not the assigns thing.
You should also be using the inspection as your way out not that let me ask my partner thing. Banks want a clean offer!
This post is older but I liked learning what % of offers are excepted. The one I have been dicussing on BP is a long shot. I am glad to hear people are only getting a a few out of many offers they submit.
Thanks