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.
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
Something to consider is purchasing vacant land. There are ways to “fix and flip” for small profits with no issues of renters. Small little wins can add up and there are a lot less issues. And virtually no competition. The process is identical to residential flipping but specific to land.
For example buy a 20-40 ac parcel that is wild and undeveloped. I Can often buy these for .70 on the dollar for clean cash deals leaving room for upgrades. I find these for clients.
Improvements that can make it worth more are mowed trails, water holes, tree stands, mineral sites, food plots. Your focused on hunters who are looking for property to purchase under $100k. These fixes cost less than $5000 depending on if u hire out or do it yourself. I advise my clients on these fix and flips all the time.
What kind of turnaround times are you seeing on those deals? From purchase to resell?
I encourage you to stick with it and keep within your comfort zone and abilities. If you are confident with your numbers and what you think you can do with the property, stick with that for your offer and eventually you will get one. It sounds like you have picked out what you are looking for and have good ideas to add value so just keep making offers.
The other side of the coin, once you do get a property, is the buyer's remorse. This means that you bid against 30 or so other people and are willing to pay more than everybody else, so either 29 people undervalued the investment or you overvalued it haha. This can be a bittersweet feeling but, again, going back to your numbers, if you put good reasoning behind them and you have a plan to make it work, then you should be confident you got a good value.
As a good rule of thumb, it isn't uncommon to make 10 or more offers before getting 1 accepted. Good luck, stick with it, and happy bidding!!
Realtor in Las Vegas, NV where we are also in a Seller's market. I had a past client move to Texas and were wanting to return to Las Vegas and see is what they did to get a house without competing with other buyers. The wife went on to the county recorders website and got a list of all houses in their area of interest that was the same floorpan as the house they lived in here before and then she wrote a letter to the owner of record saying.."Family trying to return to Las Vegas and want kids in same school zone and are fully qualified for loan and hoping that you might consider selling your house." She did receive a response, seller got agent to list the house and put it under contract immediately and then represented both sides for reduced commission. This couple had rented out their old house and had used me to purchase 3 rentals they still own but knew the market was hot, most houses selling quickly and that they had enough experience to ensure that they did not overpay for the house. They did talk to me and I pulled comps and shot a video of the house for the walk thru since they were still in Texas but I was happy to help them out based on past purchases. They got a house that I would NOT have found for them since it was not listed on MLS and they saved 3% on commissions on a $600K home. I would have liked to earn a $18,000 commission but that was not in their best interest.
Try an Escalation Clause in your offers
Not sure if it went through... try an Escalation Clause
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
Terry
FHA loans for usually for people that can't qualify for conventional. @Vivian O. qualifies for a 95% loan. Why would she pay upfront MI and then monthly MI on top of that when she doesn't have to? Why save that 1.5% down payment when she doesn't need to? Why pay the higher MI rate?
If you pushed people away from conventional financing and toward FHA just because it was easier to qualify them on FHA, you were doing them a disservice. FHA goes down to a 580 score with just 3.5% down and most conventional places will go down to 620 (some lower); just so you know.
Stephanie
Small down payment, perhaps not strong lender pre-approval or unknown lender, bidding low or slow can be some of the many reasons. You need to make yourselves appear better on paper- what I mean is a deal that can close fast without trouble. Perhaps supply pre-approval letter, a bank statement with account numbers blanked out, close in 15 days, have your agent make the offer in person? Have you looked into grant programs to increase the down payment?
@Vivian O. The 5% down is definitely not confidence-inspiring for the sellers. However, you could insure the sellers of you being serious by submitting a much higher earnest money check. If earnest money offered by you is 5k instead of 1k, sellers would definitely see you as a much more serious buyer. And as long as there are right contingencies in place, your large amount earnest money should be protected as well. Good luck!
FHA loans are normally for first time buyer. The 5% down also has PMI, FHA just calls it MIP. Not exactly sure the exact percentages. I'm just saying that if you qualify for $200k for 5% down conventional, then FHA would qualify for $230-250k due to more lenient qualifying.
The issue she has is being outbidded on offers. She might have to bid more than others, and thus need higher loan amount.
Also, being a former mortgage banker, the 5% down conventional is very difficult to get approved. I saw way more FHA than I did 5% down, by a factor of 20 to 1.
Terry
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 lost a house in Oakland CA (bay area) but about 100k+... I forget the exact but basically I it was listed at something like 400 I offered something like 430 with respectable ammount down...
Out of 15 offers I was number 14, number one was cash and no apprisal and something like 10 day close. I died a little that day.
My story is not unique and it's only gotten worse, but it's crazy to see the ripple all the way to your market.
FHA loans are normally for first time buyer. The 5% down also has PMI, FHA just calls it MIP. Not exactly sure the exact percentages. I'm just saying that if you qualify for $200k for 5% down conventional, then FHA would qualify for $230-250k due to more lenient qualifying.
The issue she has is being outbidded on offers. She might have to bid more than others, and thus need higher loan amount.
Also, being a former mortgage banker, the 5% down conventional is very difficult to get approved. I saw way more FHA than I did 5% down, by a factor of 20 to 1.
Terry
What about a 203k or whatver it's called and go after the 200k house needed 30-50k in repairs? Isn't the main issue with regular FHA the strict condition guidelines
If she spoke to a lender and got pre-qualified, then lender should give her two pre-qualified letters, one for FHA, and other for 5% down conventional.
I know from experience, then those letters are not final approval, and things can go wrong. She said her fico was 740. However, does she know that underwriting takes the middle score from Transunion, Equifax, and Experian? The 740 score is the minimum you need for the best rates. What are the other two scores? If she stated 740 is the higher of all three, then underwriting will not take the 740, and take the middle score.
Terry
Any chance you can find a duplex to defer the mortgage payment to a certain degree? The price might be higher but with the rental income, the overall payment might actually be less for you.
Another option is to find a hard money lender to partner with to make a full-cash offer. It'll cost you a little more for the hard money up front but as other's have mentioned, you might be able to offer less and get the place with a full-cash offer. Then after the purchase, you could (re)finance the home and pay the hard money lender off. There are a number of things that could go wrong here (doesn't fit into the loan specs that you want, the house doesn't appraise at what you need it to appraise at, the hard money lender requires more equity in the deal, etc.) but I'm trying to think outside the box to make your initial offer appear more robust.
Another option is networking with as many wholesalers as possible at your local real estate networking events (REIA) and try to find something that can pass for an FHA loan or whatever. I've seen a few pretty solid places come through my email that might be able to pass for a conventional or FHA loan. I know some stud and studette wholesalers see houses of all conditions come across their desks. With that said, most of them require quick closes and cash offers, but I think they get long runways every now and then. You may have to pay more (once again) but you might be able to get something without having to claw it out of the competition's hands.
I'm struggling to put my thoughts together on my next idea so I'm hoping that others can fill in the details. What types of loans can you get (conventional?) where they can wrap the rehab costs into the loan? This might work in the situation that you buy a fixer-upper duplex, live in half and rehab half. Then flip to the other half. I hear of people buying fixer-uppers all the time and getting rehab costs wrapped into the loan.
At the end of the day, don't over-extend yourself. I know starter homes in the Twin Cities are getting harder and harder to find. That also means that it's starting to make sense to rent rather than buy. Maybe you should rent a primary residence and buy a rental prop in another market. This could help you offset your current rent. With your high FICO score, and a W2 income, you'd probably pretty easily qualify for another market where there is a little less competition and better rent to value.
Okay, enough thoughts for one post. DM me if you want me to elaborate.
Any chance you can find a duplex to defer the mortgage payment to a certain degree? The price might be higher but with the rental income, the overall payment might actually be less for you.
Another option is to find a hard money lender to partner with to make a full-cash offer. It'll cost you a little more for the hard money up front but as other's have mentioned, you might be able to offer less and get the place with a full-cash offer. Then after the purchase, you could (re)finance the home and pay the hard money lender off. There are a number of things that could go wrong here (doesn't fit into the loan specs that you want, the house doesn't appraise at what you need it to appraise at, the hard money lender requires more equity in the deal, etc.) but I'm trying to think outside the box to make your initial offer appear more robust.
Another option is networking with as many wholesalers as possible at your local real estate networking events (REIA) and try to find something that can pass for an FHA loan or whatever. I've seen a few pretty solid places come through my email that might be able to pass for a conventional or FHA loan. I know some stud and studette wholesalers see houses of all conditions come across their desks. With that said, most of them require quick closes and cash offers, but I think they get long runways every now and then. You may have to pay more (once again) but you might be able to get something without having to claw it out of the competition's hands.
I'm struggling to put my thoughts together on my next idea so I'm hoping that others can fill in the details. What types of loans can you get (conventional?) where they can wrap the rehab costs into the loan? This might work in the situation that you buy a fixer-upper duplex, live in half and rehab half. Then flip to the other half. I hear of people buying fixer-uppers all the time and getting rehab costs wrapped into the loan.
At the end of the day, don't over-extend yourself. I know starter homes in the Twin Cities are getting harder and harder to find. That also means that it's starting to make sense to rent rather than buy. Maybe you should rent a primary residence and buy a rental prop in another market. This could help you offset your current rent. With your high FICO score, and a W2 income, you'd probably pretty easily qualify for another market where there is a little less competition and better rent to value.
Okay, enough thoughts for one post. DM me if you want me to elaborate.
This was awesome Josh, thank you!
@Vivian O. if you want to buy a property, you should be writing 25+ offers each month. When the market wasn't as hot as it is now, we would write 100+ offers each month and only get 2-3 properties. You should also be getting on the wholesalers lists and doing your own marketing.
Be patient - 6 offers being rejected is a good thing. I would be worried that you are over-paying if you would have gotten a deal with only 6 offers.
FHA loans are normally for first time buyer. The 5% down also has PMI, FHA just calls it MIP. Not exactly sure the exact percentages. I'm just saying that if you qualify for $200k for 5% down conventional, then FHA would qualify for $230-250k due to more lenient qualifying.
The issue she has is being outbidded on offers. She might have to bid more than others, and thus need higher loan amount.
Also, being a former mortgage banker, the 5% down conventional is very difficult to get approved. I saw way more FHA than I did 5% down, by a factor of 20 to 1.
Terry
The point is, she's already pre approved for the 5% down; let her proceed. Of course the 95% has PMI, but it's not even close to the cost of FHA, especially if she gets the single premium. If she's got a 740 score, she'll have no problem with pushing her debt ratio to 50 if she has to buy a higher priced house and her PMI won't be outrageous; another reason to not use FHA.
Not sure when you were a mortgage banker, but no one in this industry, with the amount of first time home buyer programs, with the amount of grant money available, with the amount of downward pressure on MI rates for Fannie and Freddie products and with the ease of underwriting for 97% loans has been selling FHA at a rate of 20 to 1. That kind of ratio hasn't been seen in many many years if ever. I take that back; maybe when FHA was the new subprime from 2007 to 2012, but even then, I question the ethics of selling FHA unless it's absolutely necessary or the product is a perfect fit like someone that wants to buy units with 3.5% down. I'm a huge proponent of house hacking units and FHA is great for that, but that's not what this thread is about. She's getting beat to the punch and I can tell you that going to a seller with a contract that says FHA on it vs one that says conventional, the conventional wins every time if everything else is equal.
Something creative like a 203K like @Matt K suggested would be something to consider as well; again an FHA product that fits really well for units. @Vivian O, if you went with a Fannie Mae Homestyle renovation loan to buy a beat up single family and fix it the way you like, you may find the key to your issue.
Best of luck
Stephanie
@Vivian O. if you want to buy a property, you should be writing 25+ offers each month. When the market wasn't as hot as it is now, we would write 100+ offers each month and only get 2-3 properties. You should also be getting on the wholesalers lists and doing your own marketing.
Be patient - 6 offers being rejected is a good thing. I would be worried that you are over-paying if you would have gotten a deal with only 6 offers.
Going to take a special kind of agent to dedicate that kind of effort and time...
Not to mention you as a buyer have to be crystal clear in what your niche is when putting in offers so you know your numbers.
Granted practice makes perfect ...
@Vivian O. if you want to buy a property, you should be writing 25+ offers each month. When the market wasn't as hot as it is now, we would write 100+ offers each month and only get 2-3 properties. You should also be getting on the wholesalers lists and doing your own marketing.
Be patient - 6 offers being rejected is a good thing. I would be worried that you are over-paying if you would have gotten a deal with only 6 offers.
Going to take a special kind of agent to dedicate that kind of effort and time...
Not to mention you as a buyer have to be crystal clear in what your niche is when putting in offers so you know your numbers.
Granted practice makes perfect ...
Why do you need 1 agent? Use 3 or 4 or 5 agents. When we put in 100+ offers a month, I was an agent and paid someone to put together the offers. If you're not willing to put in the effort, then expect poor results
Are you buying to invest? Or buying to live there? Two completely different things honestly. I don’t understand what you mean by “running the numbers” on a single family Home you plan to live in. What would be the numbers you are running? The future value of a home that your turn a basement into a bedroom? Just kinda unclear on your goal. Buying as a rental and running the numbers makes complete sense to me, the former doesn’t though. There is no way to know the future value of the home unless you know you’ll be selling within the next few months, which doesn’t seem to be the plan.
Maybe clarify? If you looking for a home to call your own, that’s doesn’t need much work or repairs, your likely to pay market price or more, so this story is likely to continue to play out the same way.
First we are going to live in the property, make repairs as needed, add another bedroom if possible and then move out and make it a rental. We run the numbers for when we rent it out and how much cashflow we would want from the property, so that's why we are offering the number we believe works best for us.