Minneapolis, MN · Member since 2017 · 45 posts · 27 votes
So, let me just say, this market is nuts! My boyfriend and I have been actively searching for properties and submitting offers and we don't get picked. Our realtor who also invests in real estate has helped us submit strong offers. A couple weeks ago we submitted and offer on a home with 30 offers! We were too two but still didn't get picked. It has been discouraging. I dont want us to stop looking, hoping the market will change. Cause I dont want us to miss out on potential properties. I'm curious, are any of you buying or bought in this current market? Are you going through the same things? Is there anything different you guys did?
I also want to add, that we run the numbers and we go based off what makes sense and would give cash flow.
Rental Property Investor · Los Angeles, CA · Member since 2018 · 8 posts · 19 votes
8y
Your low down-payment loan is most likely the issue. In hot market, you are against 20-30% down offers (or even cash offers). For sellers, 5% down offer is too risky because it is most likely to fall out of escrow due to low appraisal, problems found during inspections that may impact the loan guidelines... In other words, any little thing can derail the process when a bigger down payment provide a safety net to counter any problems that may rise during escrow ( and problems will happen for sure).
But don't lose hope, a seller may decide to take the risk of going with a lower down-payment offer as long as it has other benefits: Higher price, short contingencies (or no contingencies), short escrow period, hard money upon offer acceptance....
My niche is Las Vegas, and probably going through same situation as Minneapolis. Getting out bid time and time again.
Here's what you are running into. For example, if you are bidding on SFR, then you got competition from owner occupied and investors. The OO is willing to pay more since they are living in property. Investors have to crunch numbers and cannot go as high as OO. Also, the down payment vs the all cash offer can sway the seller.
You need to determine your where you fall into the pecking order. Meaning are you investor or OO, and what is your financing. If you are like me, then it is 25% down and can pay 90% of list. In today's market, there are others that can pay 100% cash and 100% of list.
So, let me just say, this market is nuts! My boyfriend and I have been actively searching for properties and submitting offers and we don't get picked. Our realtor who also invests in real estate has helped us submit strong offers. A couple weeks ago we submitted and offer on a home with 30 offers! We were too two but still didn't get picked. It has been discouraging. I dont want us to stop looking, hoping the market will change. Cause I dont want us to miss out on potential properties. I'm curious, are any of you buying or bought in this current market? Are you going through the same things? Is there anything different you guys did?
I also want to add, that we run the numbers and we go based off what makes sense and would give cash flow.
Are you preapproved for a loan and submit a preapproval letter with your offer?
Is it a conventional or FHA loan?
Do you submit proof of funds to close on the loan?
Do you have any contingencies in your offer?
The market here is so hot I don't alow agents to show the current house we are selling unless their buyer has preapproval Of conventional loan. No FHA. And only contingency allowed is 5 days to be inspected by professional inspector.
If you are working a full time job, then MLS, Zillow, Redfin, is the normal process to find properties. You will also find increased competition as other are doing this way. The people who network, do RE full time, wholesalers, are looking for the OFF MARKET properties...........meaning not MLS. However, those deals are normally all cash.
Rental Property Investor · Los Angeles, CA · Member since 2018 · 8 posts · 19 votes
8y
Your low down-payment loan is most likely the issue. In hot market, you are against 20-30% down offers (or even cash offers). For sellers, 5% down offer is too risky because it is most likely to fall out of escrow due to low appraisal, problems found during inspections that may impact the loan guidelines... In other words, any little thing can derail the process when a bigger down payment provide a safety net to counter any problems that may rise during escrow ( and problems will happen for sure).
But don't lose hope, a seller may decide to take the risk of going with a lower down-payment offer as long as it has other benefits: Higher price, short contingencies (or no contingencies), short escrow period, hard money upon offer acceptance....
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
Find a way to make your offer more valuable to the seller. Plenty of ways to do this with out increasing your price.
You could reduce inspection period and let seller keep rents /sec deposit and do a 30 day close. This would have minimal impact on your funds but could be valuable to the seller...
Professional · Anaheim, CA · Member since 2017 · 1k+ posts · 686 votes
8y
Talk to a lender and get yourself pre-qualified, and get letter from lender with pre-qualified amount and terms. I would say go FHA with 3.5% down, as ratios are more lenient than 5% down.
As far as properties, you might have to look for properties that have been on the market for 100 plus days, as those are passed over by stronger borrowers. Perhaps if seller has property on market for extended period, they are more willing to deal.
Do you know your fico score? the more you know your credit worthiness, the better chance you will be able to get approved.
Rental Property Investor · Los Angeles, CA · Member since 2018 · 8 posts · 19 votes
8y
With the help of your agent, try to find out what is very important for the sellers.
For instance:
- They may need want to stay longer after the sale and you may offer a rent back option at a very interesting price (sometimes it can be OK to be cash negative for a couple of months if it helps secure a deal)
- You may give your guarantee on the purchase agreement that you won't ask for any credit and repairs (and won't try to renegotiate).
- You may add that you are ready to pay a per diem penalty if you don't close on time
- You can make a part of your earnest money deposit hard (meaning that a portion won't be refundable and will be released to the seller as soon as your offer is accepted)
In other words, you have to understand what the seller needs and add value to your offer to try to balance the low down payment.
St. Paul Mn · Member since 2018 · 2 posts · 3 votes
8y
@Vivian O. I am in the exact same place as you are. In the same market with the same loan option. I have been beaten multiple times as well. Even $40k over on list price didn’t work. I’m feeling defeated and wondering if now is the right time to buy. Still have my eyes out there looking, but I don’t want to make a poor decision, especially on my first purchase.
Thanks for asking the question, these responses are helpful! Good luck to you!
Minneapolis, MN · Member since 2017 · 45 posts · 27 votes
8y
@Terry Lao yes we have done all the above, we first went with FHa but decided to go conventional. But we will talk to our team and see what they say as well. and the FICO score is strong.
We just have to try a different approach with our search, like you said about properties that have been on market 100 plus. Thank you!
Minneapolis, MN · Member since 2017 · 45 posts · 27 votes
8y
@Terry Lao, there are a lot of comments and I am responding to what I see. I understand what you are saying and taking everyone's advice to consideration. You didn't need to respond like that.
Professional · Anaheim, CA · Member since 2017 · 1k+ posts · 686 votes
8y
FHA borrowers are 3.5% down with flexible debt ratios of 33/40. While a 5% down program are 28/33, and more stringent. A pre-approved letter from lender on FHA program automatically lets seller know that you are first time home buyer. A 5% down borrow is usually one who has higher income like 150K but did not save for down payment.
Fico scores are more relaxed for FHA than 5% down. Maybe only need 680 for FHA as opposed to 740 for 5% down.
Get that pre-approved letter in hand. That is what the seller's agent will ask for.
Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
8y
@Vivian O.Your 5% down conventional is the right one product don't listen to those saying that you need FHA in our market is the exact opposite even if you have FHA or not benefiting yourself. A few things you can do.
Your 5% down conventional is the right one product don't listen to those saying that you need FHA in our market is the exact opposite even if you have FHA or not benefiting yourself. A few things you can do.
Get yourself pre-underwritten by your lender meaning you go fully through underwriting the next best thing to cash it even better than Your 5% down conventional is the right man product don't listen to those saying that you need FHA in our market is the exact opposite even if you have FHA or not benefiting yourself. A few things you can do.
1. Get yourself pre-underwritten by your lender meaning you go fully through underwriting the next best thing to cash.
2. Write a cover letter to the sellers about yourself and how the whole connect with you it must be personal and positive.
3. Make sure your lender and your realtor on the same page and are selling each other to the listing agent on each offer.