Have submitted 6 offers so far....
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Rental Property Investor · Los Angeles, CA · Member since 2018 · 8 posts · 19 votes
8yYour 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....
Cy
109 Replies
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes8y
Doesn't FHA have stricter guidelines with respect to the condition of the house... Which could make it more difficult on seller and even more so if buyer doesn't have funds repairs?
Unless they went something like 203k or the Fannie version I think ? I'm not familiar with these loan products as they're not something I use. But wouldn't something like this let them chase older properties that need repairs and finance it with the low down ?
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes8y
How to stand out in the frenzy? I can tell you as a seller I have no interest in FHA or VA and will take conventional first. Condition and railings and Windows and oops I think that's a fleck of peeling paint on the upper rear facia over there.
Influencers (people in your circle of friends than know EVERYBODY) need to know you are looking for a specific type of house in a specific area at a specific price point. I havent heard anything specific about your criteria, only that you are following the herd, hoping to stand out. Moo...
I'd go to my favorite neighborhood and doorknock before I got to the back of the line. See if folks know anyone wanting to sell. Beats banging your head against the wall 'the normal' way, Viv.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Steve Vaughan these types of frenzies I think kind of started in Silicon valley in the mid 80s we were still in the family home in Cupertino.. and we would get door knockers.. usually nice Asian couple and walk up knock on door.. We pay cash for your home right now LOL.. I would answer well a buyer using a loan gives us cash so that's nice.. but its price point that's more important to us.. But yes door knocking works.. will people do it.. Not really .. but some do.
We just recently bought a winter home in Vegas and got in before the market really got crazy like now.. my daughter is an agent there and same thing 10 to 20 offers on anything under 250k these days.. pretty tough conditions for first timers.
I don't really have an answer other than your thought process Belly to Belly.. that's what my Daddy taught me about real estate back in the late 60s as I was gearing up to enter the profession mid 70s.. its belly to belly get of the phone and talk to these people face to face... well now its get off the text and computer and talk face to face..
- Real Estate Agent · Queen Creek, AZ · Member since 2018 · 64 posts · 35 votes8y
In my market we use escalation clauses, where in your offer you state something to the tune of "willing to pay $500 over the highest offer up to xxxxx$," and they must provide a copy of the highest offer we are out bidding.
If I were the seller I too would choose an offer with a conventional loan over one with FHA financing because of the potential of things like peeling facia paint.
Good luck.
- Rental Property Investor · Minneapolis, MN · Member since 2014 · 95 posts · 53 votes8y
Welcome to the most fun and sometimes frustrating part of the process: the hunt!
You'll get there. Each time you do it; you'll learn a bit more about the approach, process, offer, and strategy.
Good luck!
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes8y
Originally posted by @Jay Hinrichs:
@Steve Vaughan these types of frenzies I think kind of started in Silicon valley in the mid 80s we were still in the family home in Cupertino.. and we would get door knockers.. usually nice Asian couple and walk up knock on door.. We pay cash for your home right now LOL.. I would answer well a buyer using a loan gives us cash so that's nice.. but its price point that's more important to us.. But yes door knocking works.. will people do it.. Not really .. but some do.
We just recently bought a winter home in Vegas and got in before the market really got crazy like now.. my daughter is an agent there and same thing 10 to 20 offers on anything under 250k these days.. pretty tough conditions for first timers.
I don't really have an answer other than your thought process Belly to Belly.. that's what my Daddy taught me about real estate back in the late 60s as I was gearing up to enter the profession mid 70s.. its belly to belly get of the phone and talk to these people face to face... well now its get off the text and computer and talk face to face..
Yep, I hear you, Jay. So glad not to be just starting out and fighting the crowds on the MLS. Sounds like a good way to lose your shirt, but at least you'll get to maintain and work on a property for free in the breeze. Lol
I have only door knocked down the block when I've had a FSBO going or when I just bought a place and wondering if anyone else wants or knows anyone that wants a fair deal, no commissions. Ask 'do you know of anybody', not 'do you?'. People have an out and are less defensive that way.
I was suggesting she I'd her specific farm and not offer low ball quick cash, but a fair deal and if they know of anyone thinking of selling. All cash quick close 70% minus repairs- fuhget about it!
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve Vaughan:
Originally posted by @Jay Hinrichs:
@Steve Vaughan these types of frenzies I think kind of started in Silicon valley in the mid 80s we were still in the family home in Cupertino.. and we would get door knockers.. usually nice Asian couple and walk up knock on door.. We pay cash for your home right now LOL.. I would answer well a buyer using a loan gives us cash so that's nice.. but its price point that's more important to us.. But yes door knocking works.. will people do it.. Not really .. but some do.
We just recently bought a winter home in Vegas and got in before the market really got crazy like now.. my daughter is an agent there and same thing 10 to 20 offers on anything under 250k these days.. pretty tough conditions for first timers.
I don't really have an answer other than your thought process Belly to Belly.. that's what my Daddy taught me about real estate back in the late 60s as I was gearing up to enter the profession mid 70s.. its belly to belly get of the phone and talk to these people face to face... well now its get off the text and computer and talk face to face..
Yep, I hear you, Jay. So glad not to be just starting out and fighting the crowds on the MLS. Sounds like a good way to lose your shirt, but at least you'll get to maintain and work on a property for free in the breeze. Lol
I have only door knocked down the block when I've had a FSBO going or when I just bought a place and wondering if anyone else wants or knows anyone that wants a fair deal, no commissions. Ask 'do you know of anybody', not 'do you?'. People have an out and are less defensive that way.
I was suggesting she I'd her specific farm and not offer low ball quick cash, but a fair deal and if they know of anyone thinking of selling. All cash quick close 70% minus repairs- fuhget about it!
I know most people cant do this but when I was in the distressed RE space.. I had 3 teams of door knockers.. we never sent letters or any other form of advertising we KNOCKED every single NOD in our 2 million MSA... and that's how we would buy 50 + homes a year all with at least 20 to 30% equity. I cringe now a days with these folks wanting to do sub too with little to no equity day one.. got to have equity day one.
- Rental Property Investor · Milwaukee, WI · Member since 2014 · 63 posts · 16 votes8y
Originally posted by @Vivian O.:
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.
What I do with every offer is also add a letter about who we are. Here is an example:
Hello seller
Me and my girlfriend are writing to you in regards to your property at "insert address here" . We are a young couple that lives in Milwaukee and just starting out. This would be our first home that we would buy it together and begin our life. We do love the property that you are selling and we would love to own it. We realize it is a hot market and you receive a lot of offers, however we hope this letter will help you to make a decision.
Insert a picture with both of you here
Hope that helps
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes8y
Door knocking over all is definitely not for me. I was happily working on 10x different ways to achieve the perfect nap, when 3 deals fell in my lap recently.
My secret is years of treating people right- sellers and tenants. I don't need to hold back every cent of a deposit or squeeze blood out of my sellers.
A business owner friend's bro died last summer and is finally through probate. Steve, can you take a look at this place and give me your opinion on it? Sure, I'll buy it with cash since it needs some repairs to get a loan. I'll give him a few grand more than I liked, but he's a friend. Great.
Next day, get a random text from another business owner acquaintance (found out eventually) and previous tenant's MIL. She has 2 houses that came with the retirement homes she bought. Doesn't need the houses and they are on separate parcels. Would you please take a look? I hear you treated him well as a seller and him well as a tenant. Sure, I'll take a look. Just make it before or after my nap...
Treat people right, always. Work belly to belly like you say.
- Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes8y
Originally posted by @Cy Saelens:
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....
Cy
Agree completely.
Currently we are in a hot market. I sold into a hot market back in 2006. Have a property for sale, and I got three over asking offers, $720K, $740K, and $760K. The $760K from a professional couple putting 10% down. The $740K offer came from 2 investors, one putting in $385K cash and the other $200K cash, totaling $585K cash down.
I wanted to complete the transaction before year end 2006 because I saw a downturn coming. The couple offering $760K, and needing a 90% mortgage looked iffy.
Long story short, went with the $740K offer, we were able to close by 12-16-06. Glad we did, the real estate crash came in 2007, and the property which had conservative appraisals of $699K, but as high as $800K, fell to $600K by the summer of 2007. My asking was $699K.
Glad we took the lower offer as it took a few years for the market to find it's stride, and values are now double what they were at the low point in the quick 2007-2008 correction. But in my book, cash offers and near cash offers beat 10% or less down offers any day. With the $760K, offer, we would've missed the boat completely.
- Boring, OR · Member since 2018 · 18 posts · 10 votes8y
My wife and I had a former rental house for sale awhile back with multiple offers. One couple wrote a letter about who they are why they love the house, how they can see their kids growing up there, etc... . Honestly it was a strong offer but not the best and we took a chance with at them We had more of an emotional connection with them even though we had never met them. The letter made it a little more personal. Maybe it works maybe it doesn't but speaking personally if I had 2 offers real comparable I would and I'd guess the majority of sellers would go with the folks they had some type of connection to.
Good luck you'll get something great no dobut
- Flipper/Rehabber · East Brunswick, NJ · Member since 2018 · 64 posts · 152 votes8yHouse was listed for 140k my best and final was 175k and I beat 25 offers. The offer still made sense because we are adding value (Expanding kitchen, adding a bath and a bedroom). Have to get creative, you have young bucks out here that don’t care if they make pennies on their dollar.
- 8yJordan MoorheadBusiness MemberReal Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
@Vivian O. where are you looking and what are you looking for?
That's not uncommon at all. It's been happening for years and could happen for years more. Just keep going and eventually you'll get something.
The Moorhead Team5140 Reviews - Minneapolis, MN · Member since 2017 · 45 posts · 27 votes8y
Originally posted by @Gary Barella:
House was listed for 140k my best and final was 175k and I beat 25 offers. The offer still made sense because we are adding value (Expanding kitchen, adding a bath and a bedroom). Have to get creative, you have young bucks out here that don’t care if they make pennies on their dollar.
Right.
- Minneapolis, MN · Member since 2017 · 45 posts · 27 votes8y
Originally posted by @Jordan Moorhead:
@Vivian O. where are you looking and what are you looking for?
That's not uncommon at all. It's been happening for years and could happen for years more. Just keep going and eventually you'll get something.
We're looking around the twin cities/twin cities suburbs mostly Minneapolis, and single family with two bedroom where we could potentially add another room in the basement, or 3 bedroom.
Yeah we just have to keep going at it, and tweak somethings.
- Real Estate Agent · Bismarck ND & Minneapolis MN · Member since 2017 · 15 posts · 30 votes8y
Here is a new strategy that has worked for some of my buyers in your same situation. With an MLS search find homes that are over priced and just slightly above your price range. Homes that have been on the market for over 15+ days and homes that are 10-20K above your price range. Make a low offer, one that is within your budget, and then you can come in with the only offer!!! You won't have to deal with multiple offers, you can still have contingencies and even get seller paid closing costs. Not many homes will fall into this range, so not a sure thing but definitely worth investigating.
- Professional · Anaheim, CA · Member since 2017 · 1k+ posts · 686 votes8y
A lot of people chimed in on this post, including the guru Jay. All these posts talk about how to find and get offer accepted at low 5% down or FHA. However, I believe the most important part of the process is the loan. It would be a shame if you finally find a property and get offer accepted to not obtain a loan.
You never mentioned your fico score other than strong. Also, never mentioned that you have a pre-qualified letter in hand.
In all the time doing loans as a mortgage banker, I had very few 5% down loans conventional come across my desk. The reason is because they are hard to qualify for. However, many FHA loans.
If you obtained a pre-qualified letter, it would state amount you qualified for and terms.
Terry
- San Jose, CA · Member since 2017 · 69 posts · 25 votes8y
Oh man this can be frustrating...You can try auction websites. I was in a similar situation in the SD market in 2012 searching for a primary home when the market was turning around and everyone was trying to pick up a home. This was before I knew anything about running numbers and at the time was the only shot I had at purchasing a home with quickly rising prices. We were bidding on homes that regularly had 15 offers and one had 43 after being on the market 1 week with a 1 hour showing! We got lucky with a property on gohoming.com (I think hubzu now).
The key for us was that it was not listed in the local MLS so we didn't have all the other locals to compete with. Ad distribution is probably better these days with sites like auction.com but at the time the property was listed for LA county for some reason and we only had to compete with 2 other bidders (it was on zillow in the correct location). The nice thing was that it was ebay style bidding online so we could see the other offers and simply bid 1K at a time up to our limit. We bought the property for $50-75K less than offers we were putting on comparable homes in the area which weren't getting accepted.
There are many quirks with these type of auction websites. Gohoming specifically, required a lot of extra fees and requirements. Over $9K for a "Buyer's Premium" and $200 for a "technology fee", min down payment of 10%, requiring us to use their title company (which was the worst), very restricted property viewing window, sold as-is among other really annoying restrictions. How bad do you want it is the question. Here's a thread on bigger pockets to others using it in the same timeframe who opted to pass on Gohoming. It turned out to be a big win for us.
https://www.biggerpockets.com/forums/48/topics/727...
Like other's have mentioned above, providing a cover letter sometimes help. Offers were being filtered to top 5 or 10 offers and we were able to have opportunities to make best and last after the funneling. Our best and final just didn't cut it in the end with the amount of competition we were up against. Can't be certain but I like to think it helped make it to the next round in some of those situations. Think of it like applying for a job and adding a cover letter to a resume. It may not get you the job but helps get you noticed for the next round.
Good Luck!
- San Jose, CA · Member since 2017 · 69 posts · 25 votes8y
@Terry Lao It's not explicit but I think the OP responded that she provides her preapproval letter for 5% conventional on all her offers in her response to Michael Plante in her third post...
- Minneapolis, MN · Member since 2017 · 45 posts · 27 votes8y
Originally posted by @Terry Lao:
A lot of people chimed in on this post, including the guru Jay. All these posts talk about how to find and get offer accepted at low 5% down or FHA. However, I believe the most important part of the process is the loan. It would be a shame if you finally find a property and get offer accepted to not obtain a loan.
You never mentioned your fico score other than strong. Also, never mentioned that you have a pre-qualified letter in hand.
In all the time doing loans as a mortgage banker, I had very few 5% down loans conventional come across my desk. The reason is because they are hard to qualify for. However, many FHA loans.
If you obtained a pre-qualified letter, it would state amount you qualified for and terms.
Terry
FICO score above 740. With each offer we have submitted we have been pre qualified and submit it with the offer.
- Minneapolis, MN · Member since 2017 · 45 posts · 27 votes8y
Originally posted by @Ken D.:
Oh man this can be frustrating...You can try auction websites. I was in a similar situation in the SD market in 2012 searching for a primary home when the market was turning around and everyone was trying to pick up a home. This was before I knew anything about running numbers and at the time was the only shot I had at purchasing a home with quickly rising prices. We were bidding on homes that regularly had 15 offers and one had 43 after being on the market 1 week with a 1 hour showing! We got lucky with a property on gohoming.com (I think hubzu now).
The key for us was that it was not listed in the local MLS so we didn't have all the other locals to compete with. Ad distribution is probably better these days with sites like auction.com but at the time the property was listed for LA county for some reason and we only had to compete with 2 other bidders (it was on zillow in the correct location). The nice thing was that it was ebay style bidding online so we could see the other offers and simply bid 1K at a time up to our limit. We bought the property for $50-75K less than offers we were putting on comparable homes in the area which weren't getting accepted.
There are many quirks with these type of auction websites. Gohoming specifically, required a lot of extra fees and requirements. Over $9K for a "Buyer's Premium" and $200 for a "technology fee", min down payment of 10%, requiring us to use their title company (which was the worst), very restricted property viewing window, sold as-is among other really annoying restrictions. How bad do you want it is the question. Here's a thread on bigger pockets to others using it in the same timeframe who opted to pass on Gohoming. It turned out to be a big win for us.
https://www.biggerpockets.com/forums/48/topics/727...
Like other's have mentioned above, providing a cover letter sometimes help. Offers were being filtered to top 5 or 10 offers and we were able to have opportunities to make best and last after the funneling. Our best and final just didn't cut it in the end with the amount of competition we were up against. Can't be certain but I like to think it helped make it to the next round in some of those situations. Think of it like applying for a job and adding a cover letter to a resume. It may not get you the job but helps get you noticed for the next round.
Good Luck!
Yes we do add a cover letter to our offers. I just think it's high competition. But like you said "How bad do you want it?" I will check out the forum thanks!
- 8yAnthony GaydenPro MemberRental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
I recently lost out on four homes here in Omaha. This is with pre-approval from a bank and 25% down payment. All within the last month. All were on market deals.
1. Asking Price $122,000, my offer $130,000
2. Asking Price $110,000, my offer $140,000
3. Asking Price $145,000, my offer $145,000
4. Asking $133,000, got under contract, and then the property did not appraise.
One thing I have noticed lately around here is that a lot of realtors are not even looking at offers until after the open house and at least a week after a property is listed. Everyone is using escalation clauses, and there are more investors than ever.
- 8yAnthony GaydenPro MemberRental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
Originally posted by @Anthony Gayden:
I recently lost out on four homes here in Omaha. This is with pre-approval from a bank and 25% down payment. All within the last month. All were on market deals.
1. Asking Price $122,000, my offer $130,000
2. Asking Price $110,000, my offer $140,000
3. Asking Price $145,000, my offer $145,000
4. Asking $133,000, got under contract, and then the property did not appraise.
One thing I have noticed lately around here is that a lot of realtors are not even looking at offers until after the open house and at least a week after a property is listed. Everyone is using escalation clauses, and there are more investors than ever.
I should mention that every single property was a rehab.
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