Advice To Say To My Realtor

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Advice To Say To My Realtor

Dien Vo
Property Manager · Suynnyvale, CA · Member since 2016 · 18 posts · 4 votes

Hi Guys,

I asked my realtor to find me some properties on the MLS and to make offers on my request. I told her I will go find funding after a property is under contract, give earnest money, and provide proof of fund letter from a hard money lender if I go that route.

She tells me she worked with other investors and they always have their finance secured and proof of fund letter before the offer is made. She thinks the other realtor will not accept an offer without a proof of fund letter.

I agree that it is the best way to go, but in my situation I don't have secured funds and hard money lenders always ask if I have a property under contract before they can tell me that they will fund or not because it's case by case deals.

I know the risk of loosing the earnest money, but i'm willing to take the risk.

Any thoughts on what I should tell my realtor?

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
9y

Your agent is correct....without evidence of the ability to buy, most owners represented by an agent (or otherwise just aware) won't consider your offer, unless you put up a non refundable, no escape clauses, significant EM. HML's give committment letters, for whatever they're worth, every day, subject to appraisal, etc. just like regular lenders do.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    9y

    Your agent is correct....without evidence of the ability to buy, most owners represented by an agent (or otherwise just aware) won't consider your offer, unless you put up a non refundable, no escape clauses, significant EM. HML's give committment letters, for whatever they're worth, every day, subject to appraisal, etc. just like regular lenders do.

    5Reply
  • Dien Vo
    OP
    Property Manager · Suynnyvale, CA · Member since 2016 · 18 posts · 4 votes
    9y

    @Wayne Brooks I am willing to put up EM and I know the risk of losing it.  So the other realtor would not have a problem accepting an offer?

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    9y

    The problem with a buyer with no evidence that they can actually buy, is that they will back out when they can't financing, and the seller generally has to return their EM.  A substantial EM should eliminate this concern, and by substantial I mean 5-10%, with a reasonably short closing date, No inspection or financing contingencies.

    2Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    9y

    Agreed with @Wayne Brooks, big fat EMD and no contingencies at all should do it. It would for me if I was selling.

    1Reply
  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y
    Most listings these days say right in the remarks "all offers must be with proof of funds/ pre approval attached". Unless you're going off market, you'll present a weak offer without funding lined up.
    0Reply
  • Dien Vo
    OP
    Property Manager · Suynnyvale, CA · Member since 2016 · 18 posts · 4 votes
    9y

    Let say I do have POF letter.

    She told me there is only to offers that could be made. Cash which is a cash offer and financing which is only for conventional or fha.  I asked her then what kind of offer would hard money and private money would be?  She has no clue. 

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    9y

    Obviously, they are financed offers. Preapproval letters from HML's and private lenders are scrutinized more because a lot of them are just crap printed off the internet and have no value whatsoever.

    0Reply
  • Travis Hughes
    Denver, CO · Member since 2016 · 82 posts · 46 votes
    9y

    @Dien Vo it kind of sounds to me like you need to find a new agent who is more familiar with investment strategies and willing to work with you.  Has she ever represented a buyer who is closing with hard money before? 

    0Reply
  • Dien Vo
    OP
    Property Manager · Suynnyvale, CA · Member since 2016 · 18 posts · 4 votes
    9y

    @Travis Hughes She did say she has never worked with investors who used hard money or private money only cash and conventional financing and is unfamiliar with the process. 

    Yes, I think you're right to find a realtor who is familiar with investments.

    0Reply
  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    Pre approval letters from HML and private lenders are fine. The pre approval letters, even with traditional lenders, simply state what you are eligible to purchase based on the financial picture you have at that time. As with any lending, you have to go through the full process to obtain a commitment letter.

    HML and Private lenders are more common for investors. But sometimes, regular buyers will use them if they don't have the credit score to go through traditional lending channels.

    Interest rates are relative. There was a time when people thought 8% was an awesome rate to have and was a great selling point for people that might want to assume your loan when buying the house.

    0Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    Hi @Dien Vo,

    Do you qualify for a FHA/VA/USDA loan?

    If so get pre-approved and use that to finance your first deal. If you cannot get a preapproval from one of those sources I recommend getting where you can. Either raising your credit to acceptable amounts (FHA is not that high), get a down payment (Usually just a couple thousand will get you into a property). Getting where you are an "approved buyer" is the most important thing. If someone really buckles down most times they can get FHA ready in 6 months (unless there are big issues). Concentrate on that first.

    Good Luck!

    1Reply
  • Preston Schmidt
    Lender · Minneapolis, MN · Member since 2016 · 61 posts · 20 votes
    9y

    Not sure if you wanted to do this but try this: Go get a pre-approval letter from a lender with maximum payment or LTV leaving the purchase price blank so it can be used with all offers. Then once the seller (listing agent) accepts your offer, bring your purchase agreement to your hard money lender and let the seller know that you are switching lenders/financing. It happens quite often in a competitive industry believe it or not and that way you are able to put everyone's peace of mind at ease.

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    9y

    If you are making offers on properties that you know you can not close on, not only will you possibly lose your EMD, but you are also committing fraud, and your agent would be a party to it. Your agent is 100% right not to make these offers even though she my not know why she is right. You open up yourself both to civil liabilities from the seller who has clear damages, but also from the real estate commission who can either fine the parties involved or refers it to the courts for prosecution. A hearing like this in front of the administrative judge would last about 30 seconds

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    3Reply
  • Dien Vo
    OP
    Property Manager · Suynnyvale, CA · Member since 2016 · 18 posts · 4 votes
    9y

    Thank you everyone for all the advice.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y

    @Dien Vo I understand your hard money lender not wanting to agree to funding until it is under contract, but why can't they issue a pre-approval letter? The wording in those letters allows any bank to easily back out, so it is not going to legally commit your lender. It sounds like you have worked with the lenders before which leaves me wondering why they are unwilling to do a pre-approval. I can get a letter from my bank within an hour and the wording is so soft that it commits them to nothing.

    1Reply
  • John Negomir
    Littleton, CO · Member since 2012 · 29 posts · 22 votes
    9y

    My .02... On the listing side, as an agent, I'll usually give an investor about 3 business days at the most before the EM goes hard, if the offer is good and has POF or a lender letter with a contact that I can call. The solid ones can pull together their due diligence and inspection in that time, enough to know if it will work. If you're serious, get your financing options (yes, plural, HML back out all the time and yes, my sellers have kept EM before when the HML lender couldn't fulfill at the last minute) and be ready to do a go/no-go decision quickly. Make your offer compelling - quick close, no inspection, no appraisal, something - and remember you're working with what is probably the seller's largest asset in their life so don't waste everyone's time. Taking a property off the market in a strong market doesn't do sellers any favors and their agent has to look out for the seller's interests...

    0Reply
  • Phil Z.
    Real Estate Broker · Orange, CT · Member since 2013 · 951 posts · 218 votes
    9y

    There is no hard money lender that won't qualify you prior to purchasing.

    You should thank your realtor, and start looking into off market wholesaling until you have capital to purchase.

    0Reply
  • Charlie John
    Investor · Twin Cities, MN · Member since 2015 · 130 posts · 111 votes
    9y

    @Dien Vo

    If you want to offer like an investor you need to be the real deal. Proof of funds letter from your bank. Doesn't get any realer than that. 

    Your realtor is truly a middle man/woman. They want to feel comfortable submitting that offer with a real POF letter, so anything less than that kind of diminishes their trust in doing deals with you. It's their reputation too.

    0Reply
  • Dien Vo
    OP
    Property Manager · Suynnyvale, CA · Member since 2016 · 18 posts · 4 votes
    9y

    I will call other hard money lenders to get more info. Usually they always ask me if I have a property under contract and provide them with the ARV, PP, Rehab, etc.. before issuing a POF letter.

    Either way this RE agent that I was working with does not know what Hard Money or Private Money is so she has no clue how to make offers to the listing realtor. 

    I find an agent that is more familiar with the investments. 

    0Reply
  • Rashad K.
    Flipper/Rehabber · Saint Paul, MN · Member since 2016 · 120 posts · 98 votes
    9y
    Mike Vo do you know of any local hard money lenders? See if you can get a pre-qualification letter from them , and let them know you would like to purchase a property using them as your lender
    0Reply
  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    Realtors work at different levels. Some agents are able to walk buyers through the entire transaction process and properly explain all the expected steps. Other agents have to defer questions to other experts.

    An agent gets comfortable with the usual process in their area. They'll often see the usual steps over and over: offer, inspection, contract, financing, close. Nothing creative.

    Thing with investors, everyone has a different game plan and most are looking for creative ways to make their deals happen. That can make for a lot of head scratching for the average agent.

    Some agents no nothing about construction. Some have never been down to the buildings department. Some can't explain an FHA or USDA loan to you because they don't deal with them very much in their area. Most will never mention that there are down payment programs available in their state.

    The average agent doesn't come across concepts like private lending or HML, or seller financing and other creative techniques. Most agents expect the average buyer to get pre approved with a lender and have all their financing questions directed to that person.

    But, a really good agent will try their best to stay on top of any and all options, because at the end of they day they have to sell that deal to the listing agent and the property owner.

    2Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    HMLs lend up to what - 70% of FMV? Then maybe rehab $ up to same of ARV?

    Don't they also want your skin in the game, 10% or so also?

    Where are you gping to find MLS deals at 70%, Mike?

    2Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    9y

    Personally as an agent I do not submit offers without a proof of funds or pre-qual from my client.

    It's a complete waste of time for everyone involved including the buyer.

    1Reply
  • Dien Vo
    OP
    Property Manager · Suynnyvale, CA · Member since 2016 · 18 posts · 4 votes
    9y

    @Steve Vaughan I know investors here find deals on MLS all the time. Depending on the ARV and PP you can find properties on MLS with 70% LTV. Have to keep searching. Yes they do want about 20% down which is not an issue in my case.

    I was mainly concern about the RE agent. But I think I have my answer to all of these great advice. 

    0Reply
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