Cant buy a house
Real Estate Investor · Fenton, MI · Member since 2008 · 946 posts · 153 votes
I am working with a good Realtor and I make offers well above asking. I just lost out on another offer I made. It will be interesting to find out the winning bid upon closing. The house before this I made a cash offer with no contingencies and, an offer $1500 LESS than mine was accepted instead.
Is there some "inside track" I am not aware of?
I have NO contingencies. Many of you have mentioned a deposit. The sellers are not even mentioning a deposit. You simply submit a bid, they accept or deny and you close on the house. Good faith deposits are more for owner occupied homes. I am after investment properties which close upon acceptance. The problem is I need to learn a secret handshake or some such thing to get my offers accepted.
The seller may not be mentioning a deposit but you said that the issue was the sellers feel that there is a possibility you will not close. So your offer of a non refundable EMD gives them what they ARE looking for. If you have no contingencies and you have put up an EMD of say 25% of the purchase price, then were you to back out the seller would be able to keep the money. That gives them the confidence that you will close.
And your statement about good faith deposits (earnest money deposit) being for OO homes is inaccurate. I have never made an offer with anything less than 5K EMD, and the last two REO purchases I have had requested 10% EMD in their counter offers.
Not to stir the pot any more but just came across this in a HUD listing
"Buyer's agent shall have 48hrs to submit EMD to Listing Broker, in Cashiers Check or Money Order, payable to listing office."
But I agree you need to write what your EMD will be in your PA- 10% for cash offers.
I think @K. Marie Poe hits the nail on the head - it looks like the OP as well is agent misunderstand the EM concept. You do NOT submit a briefcase full of cash along with the offer. Instead, you submit a commitment (often in the form of a copy of a check) that you are ready to hand over that briefcase of cash as soon as (or within 24-72 hours of) the offer is accepted. This assures the seller that they will lose at most 24-72 hours should they run into a tire kicker that is not going to perform. As opposed to have the property tied up and get nothing in return if the buyer bails.
I admit I was not aware of that. This does explain it better.
I had a lot of trouble in my area getting offers accepted when I started. It takes some time to figure out how to get a offer accepted, it took some serious thinking about peoples motivations to figure out the system.
First off, have you considered that your agent might be the equivalent of the stinky kid. Unbeknownst to you, maybe your agent is the one no one wants to work with. At the end of the day RE is a relationships business. If your agent has burnt bridges in the past it could be affecting you offers.
EM is part of the offer contract, it is not sent in with the offer, but sent in after the offer.
Proof of funds is usually sent with the offer.
A buyers agent is usually useless. The MLS is searchable by anyone in my area. Not all of the background information is available, but I can still view everything on the MLS. If that is not the case use zillow, redfin, loopnet or similar. Maybe you should find out if the same is true for you. Then you can assemble your own buying list & not feel committed to one agent. It also helps you avoid things like your agent being swayed towards certain properties because they were offered a bonus commision.
By using the sellers agent you are essentially offering them a 3% bonus commission on closing of the deal. It is pretty strong motivation to at least get your offer in front of the person making decisions.
I think @K. Marie Poe hits the nail on the head - it looks like the OP as well is agent misunderstand the EM concept. You do NOT submit a briefcase full of cash along with the offer. Instead, you submit a commitment (often in the form of a copy of a check) that you are ready to hand over that briefcase of cash as soon as (or within 24-72 hours of) the offer is accepted. This assures the seller that they will lose at most 24-72 hours should they run into a tire kicker that is not going to perform. As opposed to have the property tied up and get nothing in return if the buyer bails.
I admit I was not aware of that. This does explain it better.
My concern is that you are working with an agent who isn't helping you understand the process and/or doesn't understand it themselves. If your agent isn't pushing you to do everything in your power to make an offer that will get accepted then you have the wrong agent. Nothing personal about the agent. Lots of agents don't know how to make offers on REOs. Or short sales. Or commercial property. Try a new agent.
Proof of funds is usually sent with the offer.
A buyers agent is usually useless. The MLS is searchable by anyone in my area. Not all of the background information is available, but I can still view everything on the MLS. If that is not the case use zillow, redfin, loopnet or similar. Maybe you should find out if the same is true for you. Then you can assemble your own buying list & not feel committed to one agent. It also helps you avoid things like your agent being swayed towards certain properties because they were offered a bonus commision.
I think this might be regional. Most REO listing agents in my area will not work with unrepresented buyers. The busy REO agents work volume for certain clients and it's the rare circumstance where they are willing to work directly with the buyer. They'll send you away and ask you to make the offer through an agent. You can develop a relationship with a few and maybe get them to call you on stuff. Some will give you to a different agent in their office. Everything moves here so there's no need to play the dual representation game.
I've had that happen as well.... But they always make sure to collect their referral fee.
I've had that happen as well.... But they always make sure to collect their referral fee.
True about the referral fee. But the referral fee is small compared to the half commission. I think it's in an agent's best interest not to do dual representations on REO properties. Keeps their hands clean and they have nothing to justify to the lenders. I'm sure the agent with a few REOs can work duals with no problem. In my farms, the REO agents are volume businesses, with teams for evictions, property management and clean-up. There are some who ready properties for retail as well, making them "FHA eligible".
@Mark Forest, they may not "accept" EMD until acceptance but that does not translate into you not having to put EMD with your offer for it to be taken seriously.
The way I do it is I write out a check for the amount of the EMD, the EMD is indicated in the offer and the picture of the EMD check made out to *WHOEVER*, as well as POF are included in the offer package.
The *WHOEVER* is typically my attorney who is also my escrow agent. Normally the check stays with me and if the offer is accepted I send it in. If it's not accepted I just tear it up. If the seller dictates that the escrow must be confirmed, which is very rare in my experience I will send the check to my attorney and she will hold on to the check and know not to deposit it until I tell her the offer has been accepted, if not she tears it up again. In some cases, especially with REOs, seller dictates title agent AND escrow agent, but typically, no need to send in until acceptance. It sounds like your agent is not experienced if she told you to put a big zero on your offers. I am curious, are you actually sending in actual contracts? or the more casual "Letters Of Intent To Purchase"?
It is also possible having a buyer agent in your market put you at a disadvantage in deals where the listing agents has full control and influence with the sellers. I was having really bad luck getting anything accepted on short sales even with all cash, high EMD and no inspection (or inspection prior to short sale package submittals), and like you, I would check the closed prices and found a number of them lower than my offered price. I finally had a talk with my buyer agent and she suggested to me that may be everyone was double dipping and having her in the mix lowered my chance. I admired her for telling me that and will still use her when I believe the listing agent is dealing fairly, otherwise I deal directly with the listing agent and that made ALL THE DIFFERENCE. I hate to admit it but South Florida is full of scammers.
You mentioned you feel obligated to be loyal to your agent since she emailed you the listing. I think it's great you have a sense of loyalty. Now is she doing the leg work and sending you unlisted properties and special listings? Or are you simply getting a daily email from an automated service where may be 4 months ago you told her your price range, desired locations etc...? If so you can get these automated listings every day from hundreds of sources online.
Good luck.
@Mark Forest ok, so say you are right and its isn't customary in Michigan. If you were to include a copy of the earnest money check with your offer it makes it an even stronger offer.
It could also be this in combination with in some of the houses the seller would like to sell to someone who will live in their house because of sentimental reasons. In our market a home that would have been a perfect flip just sold to a family. It needed a crazy amount of work which would scare away most new homeowners but the seller didn't want to sell to an investor.
If all things are equal sometimes it is the agent you are working with. If another agent doesn't like to work with them, the way they write offers is not clean, or they have previous dealings with other agents they feel will close the deal and your agent is an unknown this can make a difference.
I am working with a good Realtor and I make offers well above asking. I just lost out on another offer I made. It will be interesting to find out the winning bid upon closing. The house before this I made a cash offer with no contingencies and, an offer $1500 LESS than mine was accepted instead.
Is there some "inside track" I am not aware of?
If your offer is above what the seller wanted (which is probably already at or about market value) what sort of margin are you looking to make on the deal? Or is this a rental? Also sounds like these are MLS listings?