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
Originally posted by @Todd Dexheimer:
Originally posted by @Matt K.:
Originally posted by @Todd Dexheimer:
@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
It's actually more that she needs to learn what she needs from the agent........ then find a agent that works well with her. Your typical agent even an investor friendly one doesn't blast off 100+ offers a mo for a SINGLE 230k duplex. Not to mention some agents value their name/rep and don't want to be known as the agent that submits lowballs to everything... not that that's wrong.... but again not your typical agent.
But I agree with you, it takes effort.... but agents also should be compensated and a commission from that small of a purchase isn't likely to produce a good agent. - Realtor · Los Angeles, CA · Member since 2016 · 46 posts · 8 votes8yHere in Los Angeles we are doing 14 day escrows with lender paying 100 per diem if we don’t close before 14 days . Offers get accepted quick !
- Burnaby, BC · Member since 2017 · 282 posts · 268 votes8y
In very hot markets, usually you'll need to do one of two things to win the bid:
1) Go in subject free
2) Make a bid well above asking price
Sometimes you'll need to do both. Don't get discouraged though or start making bids that don't make sense for you. The nice thing about being an investor is that we have lots of options to bid on, and can bid without feeling pressure to MUST win because we actually want to live there.
If you're getting a high % of your bids accepted, chances are your bids are too generous anyway so I wouldn't worry about getting offers rejected but I do know how frustrating it can be to spend so much time and feeling like the work was for nothing but stick to your buying principles no matter what.
- Investor · USA · Member since 2015 · 325 posts · 447 votes8y
@Vivian O., the problem you have stated is pretty common right now. I have been on both ends working with buyers and sellers in multiple offers. I am amazed at how little effort agents put into offers that are sent over. Some literally just send over an electronic offer link and nothing else. It is pretty amazing!!! My strategy has always been to be the guy that just calls the listing agent over and over to try and connect with them. After my client is interested I call them and try to find out some status, then my client wants to write and offer, I call again to let them know we are going to send over an offer. Once I send it over, I make sure they received it with another follow up call. On the review date I call and let them know my client is ready to buy and has talked to the lender. Then I try to take to them later on that day. I always drop the line that "this will be the easiest home you have ever sold!"
All of this is somewhat over the top but necessary. This is what happens. Listing agent is looking at 40 offers that are probably about the same. They have to make a choice between them and really have no idea. The agent that builds the personal relationship the fastest will get picked. Best of luck!
- Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes8yHang in there. It’s a sellers market. But lending is cheap and easy. It’ll be a buyers market when lending is expensive and hard to get. Trick is finding ways to prosper in both types. I’ve been buying about 1 property (multifamily) a quarter. Slower pace than I’d like but you gotta buy what makes sense even if others are not.
- Investor · Venice, CA · Member since 2016 · 163 posts · 49 votes8y
If I were in your position...
Drive for dollars and find a house on your own. You're going to be on the MLS for years until the market turns IMO. Go to local REI meet-ups and try and meet some wholesalers. Or find a pocket of the city you want to move and start sending out handwritten letters/mailers.
203k loans when you find something and make the house a rental house. Not your home. Move out in 2yrs and you're on your way.
- Dallas, TX · Member since 2014 · 29 posts · 6 votes8y
Hey! So I understand where you are coming from. I am a pretty novice buyer my self being only 20 years old. However I just bought my very first property and let me tell you I had made over what seemed like 15 offers all for the ASKING PRICE. However there were people giving $20,000 OVER asking. I simply could not compete.
My offers were competitive because i was putting down $40,000 (20%) and my lender would close in 14 days guarantee. However that still barely gave me any kind of edge. I got lucky with one property who someone put BACK on the market, it hit the MLS and literally with in 4 mins without even going to a showing I made an offer on it. some problems came up so i even negotiated it down below its appraised price. However some experts I know are predicting a rate spike coming up even tho its fluctuating up and down these days, last i checked from Fannie and Freddie. Higher Rates means less people can afford to get a loan and pay the high monthly payments. meaning less buyers and lower real estate prices. My advice, you can keep trying relentlessly and hope to get lucky or when it becomes less competitive as the rates increase, deal with the higher monthly payments. I am only 20 years old so honestly Im a self proclaimed noob these are just my 2 cents.
- Dallas, TX · Member since 2016 · 1k+ posts · 745 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.
Yep, it is what it is. Here in Dallas there seem to be very few properties worth offering on, and those that we have bid on over the last couple of years have been competitive.
We had one property that we looked at, and there were 35 other offers. Last year we put in 6 or 7 all cash offers, and didn't even get asked for a highest and best.
I think the best thing to do is just be patient. Know what a property is worth to you and don't chase. Its really easy to get caught up in the frenzy of the market.
We personally are looking at a lot of properties and have made a few bids, but really I think its better to stay on the sidelines than do a poor deal.
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes8y
@Vivian O. you are being given some confusing and contradicting advice here. Maybe I can help to put things a bit in perspective.
First, keep in mind that how offers are written and presented is very different in many States. Midwest works much different than Califoria. It's not only the state law, also lending and how offers are presented varies greatly. Some of the things I read here will definitly not fly in MN.
Second, speaking for Wisconsin and probably MN, sellers will always much prefer a conventional loan over FHA or VA! As soon as you are conventional the property does not have to pass the much dreaded FHA inspection. It often results in a repair list for the seller to keep the deal together; listing agents are well aware of this. FHA is always the the last choice for a seller. Is it better to have 20% down, yes, but the most important thing to sellers is that you are conventional. In markets like the Bay Area you need to have over 20% down, because everyone expects (!) the property to not appraise out and the buyer has to be able to close the gap with cash. You see how different local issues are. So, you did the right thing to go with 5% conventional.
Blasting out 20 or 100 offers is something I have never understood. As a listing agent I will catch that in the first 3 seconds looking at it and advise my client accordingly. I am sure it does work in a certain market segements and with the combination of desperate and maybe naive seller, incompetent listing agent and a property with issues. This approach will not work for a quality property, at least not in my market. If I write offers for myself I get about 2 out of 3 accepted. Someone will say now I am offering too much, but comapring my acqiuisitions with solds tells me different. It is a matter of understanding the seller before writing the offer and that takes some work, effort and experience.
Witch leads me to the last point - working with an great agent. I don't enjoy stating this, but everyone knows agents come in many different grades. I know from my own experience when I started working as an investor and long before I got licensed - I had to part ways from quite a few to find someone who was actually competent. A good buyers agent will get deals accepted. Not every single one, but most of it. Here is why - I can tell my clients before we write the offer what the probabability is to get it accepted. Your agent does not know what they are doing if they put you up against 30 other offers with 5% down. They should know there will be at least 5 cash offers and 3 of them will be absurdly high. Anyone who has ever read Sun Tzu knows that is not the way to go into battle. Its a waste of time at best.
The only real practical advise I can give you from afar is to find a really good agent, preferably one that specializes in buyer representation. Ask a broker for who their top performing buyers agents are. You want to work with someone who personally (not team) does over 40 or 50 transactions a year. I am with Keller Williams and you can just call any KW market center and ask to speak with the team leader; they will match you up. Hope this helps, don't get discouraged, it will work out!
- Minneapolis, MN · Member since 2017 · 45 posts · 27 votes8y
Originally posted by @Marcus Auerbach:
@Vivian O. you are being given some confusing and contradicting advice here. Maybe I can help to put things a bit in perspective.
First, keep in mind that how offers are written and presented is very different in many States. Midwest works much different than Califoria. It's not only the state law, also lending and how offers are presented varies greatly. Some of the things I read here will definitly not fly in MN.
Second, speaking for Wisconsin and probably MN, sellers will always much prefer a conventional loan over FHA or VA! As soon as you are conventional the property does not have to pass the much dreaded FHA inspection. It often results in a repair list for the seller to keep the deal together; listing agents are well aware of this. FHA is always the the last choice for a seller. Is it better to have 20% down, yes, but the most important thing to sellers is that you are conventional. In markets like the Bay Area you need to have over 20% down, because everyone expects (!) the property to not appraise out and the buyer has to be able to close the gap with cash. You see how different local issues are. So, you did the right thing to go with 5% conventional.
Blasting out 20 or 100 offers is something I have never understood. As a listing agent I will catch that in the first 3 seconds looking at it and advise my client accordingly. I am sure it does work in a certain market segements and with the combination of desperate and maybe naive seller, incompetent listing agent and a property with issues. This approach will not work for a quality property, at least not in my market. If I write offers for myself I get about 2 out of 3 accepted. Someone will say now I am offering too much, but comapring my acqiuisitions with solds tells me different. It is a matter of understanding the seller before writing the offer and that takes some work, effort and experience.
Witch leads me to the last point - working with an great agent. I don't enjoy stating this, but everyone knows agents come in many different grades. I know from my own experience when I started working as an investor and long before I got licensed - I had to part ways from quite a few to find someone who was actually competent. A good buyers agent will get deals accepted. Not every single one, but most of it. Here is why - I can tell my clients before we write the offer what the probabability is to get it accepted. Your agent does not know what they are doing if they put you up against 30 other offers with 5% down. They should know there will be at least 5 cash offers and 3 of them will be absurdly high. Anyone who has ever read Sun Tzu knows that is not the way to go into battle. Its a waste of time at best.
The only real practical advise I can give you from afar is to find a really good agent, preferably one that specializes in buyer representation. Ask a broker for who their top performing buyers agents are. You want to work with someone who personally (not team) does over 40 or 50 transactions a year. I am with Keller Williams and you can just call any KW market center and ask to speak with the team leader; they will match you up. Hope this helps, don't get discouraged, it will work out!
Yeah we found out about the thirty offers after we didn't hear from them at the Time they said they would decide. We were top two, and we didn't get it cause the other person gave a bit more money. Apparently it was a tough decision. But Thank your for your advice and encouragement.
- Rock Hill, SC · Member since 2015 · 104 posts · 209 votes8yAs a millennial, I’ve decided the only way I will be able to own a house is if I build it out of participation trophies. It’s the only resource my generation has plenty of. Kidding, of course. Stay after it. You will find something. And it could be a blessing in disguise that you are not getting them.
- Rental Property Investor · Buena Vista, CO · Member since 2015 · 101 posts · 47 votes8y
Vivian - I face the same thing in Denver, although we write cash offers. With so much competition, timing and differentiators are the key(s). See if you can double the amount of offers going out with your own research - but your agent must be willing. Also, search for aged properties that have been on the market for a long time. There's a reason someone else didn't buy them - if you find out why and overcome what scared everyone else, you have a new strategy. Also, network! Try speaking to some wholesalers at local REI events (https://www.mnreia.com) - many times they'll have off market properties. You may have to use hard money to purchase, but it's an option.
- Aurora, CO · Member since 2016 · 158 posts · 118 votes8y
I have read through most of the comments you have gotten and it sounds like you are getting calculus advise when you are in the basic arithmetic stages.
I have to say personally, buying in a hot market, 6 offers isn't that many. In Aurora CO in 2015 when I purchased my first home I had to submit 16 offers before one was accepted. Buying homes is a numbers games, what numbers you need to hit to make it work, what numbers you are going to pay for the home, what numbers you are going to submit before you get a deal under contract. It doesn't cost you anything (besides time and emotional stress) to make an offer. So make those offers, throw as much mud against the wall and see what sticks. If you can go look at homes during the week go do that. Check out a home on Monday and put in the contract you want to have an answer by Tuesday Night. And then on Tuesday look at another and have a contract ready to go when the one on Tuesday night gets rejected. If you are going to be full time (which I assume you are) then just treat it like a numbers game an go from there.
It sounds like you have all your ducks in a row for your offers, pre-approval letter etc. And it sounds like you cannot make your offer any stronger with a higher down-payment or higher purchase price. So you need to play the numbers game. And since this is your first house it is going to be the most emotionally draining purchase, you need a place to live, but stick to your numbers and your goal and eventually something will come along.
When you move on to house 2 or 3, then you can start with the calc lessons. But this is your first house, crawl before you walk.
Do not get discouraged, in a hot market 6 offers isn't anything, and it sounds like you got close once already!
- Minneapolis, MN · Member since 2017 · 45 posts · 27 votes8y
Originally posted by @Michael Randle:
I have read through most of the comments you have gotten and it sounds like you are getting calculus advise when you are in the basic arithmetic stages.
I have to say personally, buying in a hot market, 6 offers isn't that many. In Aurora CO in 2015 when I purchased my first home I had to submit 16 offers before one was accepted. Buying homes is a numbers games, what numbers you need to hit to make it work, what numbers you are going to pay for the home, what numbers you are going to submit before you get a deal under contract. It doesn't cost you anything (besides time and emotional stress) to make an offer. So make those offers, throw as much mud against the wall and see what sticks. If you can go look at homes during the week go do that. Check out a home on Monday and put in the contract you want to have an answer by Tuesday Night. And then on Tuesday look at another and have a contract ready to go when the one on Tuesday night gets rejected. If you are going to be full time (which I assume you are) then just treat it like a numbers game an go from there.
It sounds like you have all your ducks in a row for your offers, pre-approval letter etc. And it sounds like you cannot make your offer any stronger with a higher down-payment or higher purchase price. So you need to play the numbers game. And since this is your first house it is going to be the most emotionally draining purchase, you need a place to live, but stick to your numbers and your goal and eventually something will come along.
When you move on to house 2 or 3, then you can start with the calc lessons. But this is your first house, crawl before you walk.
Do not get discouraged, in a hot market 6 offers isn't anything, and it sounds like you got close once already!
Thanks Michael! Awesome advice!
- Minneapolis, MN · Member since 2017 · 45 posts · 27 votes8y
Originally posted by @Michael H.:
As a millennial, I’ve decided the only way I will be able to own a house is if I build it out of participation trophies. It’s the only resource my generation has plenty of.
Kidding, of course. Stay after it. You will find something. And it could be a blessing in disguise that you are not getting them.
Lol, but thanks Michael.
- Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes8y
Good afternoon Vivian,
That Market is very tough just like my market here in the Bay Area, You would literally have to overpay for the property and have a negative cash-flow or very little if any as I've seen it time and time again. The Bay Area and your market for example are perfect markets for appreciation. So if you want to build equity, these markets are perfect for investing in. But if you're looking to build a cash-flow portfolio I would recommend to go out of state in a less equity appreciating market. I like the Midwest particularly, houses stay pretty much the same in terms of value with very little appreciation but has strong cash-flow. Right now 12% returns are getting harder and harder to come by but i'm finding good areas where you can still yield 9-11% COC which to me is amazing. I won't invest in anything unless the return is 9% or greater.
Best,
Junior
- 8yCarter CrowleyPro MemberFlipper/Rehabber · Oshkosh, WI · Member since 2016 · 107 posts · 49 votesStart marketing and find off market property. Then you will have few if any competition and a seller may agree to sell even though you aren’t offering cash. Once it gets to the MLS typically price points go up and deals are significantly harder to find
- Investor · Biddeford, ME · Member since 2017 · 282 posts · 180 votes8y
See if you can do an escalation clause!
- Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes8y
Vivian - its the same here in WA...some tips :
* get fully pre approved ( not just pre qualified) so you can offer a short closing period to be attractive
*consider either a pre inspection before offer is made or remove inspection contingency
* make your earnest money deposit as large as possible
* include some sort of escalation feature in your offer
* try to make an offer immediately on a desired property ( even if there is a date set to have offers made by )
* try to locate proeprties before they hit all the sites like Zillow ….
- Minneapolis, MN · Member since 2017 · 45 posts · 27 votes8y
Originally posted by @Dave Skow:
Vivian - its the same here in WA...some tips :
* get fully pre approved ( not just pre qualified) so you can offer a short closing period to be attractive
*consider either a pre inspection before offer is made or remove inspection contingency
* make your earnest money deposit as large as possible
* include some sort of escalation feature in your offer
* try to make an offer immediately on a desired property ( even if there is a date set to have offers made by )
* try to locate proeprties before they hit all the sites like Zillow ….
We have done all of these on the properties we are interested in. The market is just nuts!
- Real Estate Agent · Astoria, NY · Member since 2016 · 60 posts · 55 votes8y
@Terry Lao you seem to be the one not paying attention to the OP or the things being posted here. @Vivian O. clearly stated in her 3rd post on this thread, she IS PRE-APPROVED for a loan. I'm not sure why you keep harping on the pre-approval, since she mentioned at least once, if not more, that she is already pre-approved. And you keep mentioning FHA when the nature of her loan has almost zero impact in the particular situation she's having a challenge with. Additionally, she's working with a Realtor, and any Realtor worth their salt is going to make sure their client is qualified to buy -- so clearly she is qualified.
Vivian, I suspect that whether you go FHA or Traditional won't make much or any difference with your particular issue. Your issue seems to be where you're looking for your deals, and how much competition you have. So, as others have mentioned, you need to look at how you can avoid that competition.
If you are buying this property purely as an investor for cash flow, then I doubt any personal letters will make an impact. I'm not a big believer in the whole personal letter thing, anyway. You don't write a personal letter when you haggle over a used car do you? You don't write a personal letter when you buy something at an auction either -- which is pretty similar to buying a home in a competitive market like yours. If I'm a seller's agent, I kind of laugh at the personal letters and counsel my client to ignore the letters and focus on the STRONGEST BUYER. A distressed seller, in particular, won't give a damn about how sweet you are or how much you love the house -- they're in trouble and need as much money as possible as quickly as possible and that's all they care about.
I think the key issue is how/where you're finding these properties. The MLS is going to have the widest possible exposure and the most buyers to compete against you. If everyone desperate to buy a home sees the same deal, it's only natural that you're going to be in a situation with 30 bids -- and you'll lose every time because an end user will almost ALWAYS beat out an investor.
You need to be finding off-market properties and FSBOs that not many people will be looking at.
You might consider changing agents and working with a LISTING AGENT who focuses on listing short sales, pre-foreclosures, REO and foreclosure properties. An agent who does that already will have the mechanisms in place for finding off market properties, so you don't have to spend the time and money to do it. Now, you'd be working direct, which opens you up to some risk because you'd be working with the listing agent, or possibly in a dual-agency situation. But if you're aware of that and comfortable with it, you may have more luck finding a property you can afford without having to battle against 30-40 other buyers.
- Professional · Anaheim, CA · Member since 2017 · 1k+ posts · 686 votes8y
Bottom line. She is getting out bid left and right, and twice on Sundays. Either option 5% down or FHA 3.5% down, is not comparable to 20% down or all cash. The personal letter, okay, but no letter is going to compare to say $10-15k cash difference in price.
Knowing your situation, the only choice is go outside area where competition is less. Or bid more. If you bid more, then you need to qualify for a larger loan amount.
5% down will not qualify for more than FHA. If you qualify for 150k 5% down, then you probably qualify for 180k FHA.
Simple.
Terry
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Daniel Akerman:
@Terry Lao you seem to be the one not paying attention to the OP or the things being posted here. @Vivian O. clearly stated in her 3rd post on this thread, she IS PRE-APPROVED for a loan. I'm not sure why you keep harping on the pre-approval, since she mentioned at least once, if not more, that she is already pre-approved. And you keep mentioning FHA when the nature of her loan has almost zero impact in the particular situation she's having a challenge with. Additionally, she's working with a Realtor, and any Realtor worth their salt is going to make sure their client is qualified to buy -- so clearly she is qualified.
Vivian, I suspect that whether you go FHA or Traditional won't make much or any difference with your particular issue. Your issue seems to be where you're looking for your deals, and how much competition you have. So, as others have mentioned, you need to look at how you can avoid that competition.
If you are buying this property purely as an investor for cash flow, then I doubt any personal letters will make an impact. I'm not a big believer in the whole personal letter thing, anyway. You don't write a personal letter when you haggle over a used car do you? You don't write a personal letter when you buy something at an auction either -- which is pretty similar to buying a home in a competitive market like yours. If I'm a seller's agent, I kind of laugh at the personal letters and counsel my client to ignore the letters and focus on the STRONGEST BUYER. A distressed seller, in particular, won't give a damn about how sweet you are or how much you love the house -- they're in trouble and need as much money as possible as quickly as possible and that's all they care about.
I think the key issue is how/where you're finding these properties. The MLS is going to have the widest possible exposure and the most buyers to compete against you. If everyone desperate to buy a home sees the same deal, it's only natural that you're going to be in a situation with 30 bids -- and you'll lose every time because an end user will almost ALWAYS beat out an investor.
You need to be finding off-market properties and FSBOs that not many people will be looking at.
You might consider changing agents and working with a LISTING AGENT who focuses on listing short sales, pre-foreclosures, REO and foreclosure properties. An agent who does that already will have the mechanisms in place for finding off market properties, so you don't have to spend the time and money to do it. Now, you'd be working direct, which opens you up to some risk because you'd be working with the listing agent, or possibly in a dual-agency situation. But if you're aware of that and comfortable with it, you may have more luck finding a property you can afford without having to battle against 30-40 other buyers.
depends on the Market the personal letters really work in the portland market.. the sellers are not so hard nosed and tend to be very caring if they are older owners that have lived in portlandia for any number of years.. just watch the TV show Portlandia its reality I know its a comedy but it is the way it is in that market.
I can see in NY it being different as there is a thought process that new yorkers are more matter of fact..
I could see this working in Minneapolis as well.. given the demeanor of that population.
Of course if its non owner occ much less effect but if its owner occ to owner occ those letters do have an impact
- Professional · Anaheim, CA · Member since 2017 · 1k+ posts · 686 votes8y
Hello Jay, hope all is well in Las Vegas. I'm sure the weather is hot out there as well as the real estate market. Median price numbers came out for May'18, and SFR median is $295k. At this pace, will pass the pre-recession high of Aug'06 and $315k.
You gave me a good idea. Personal letter for purchasing investment properties. I'm sure that If I did one, it will either give seller a good laugh or it might actually work.
Terry
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