Having trouble purchasing primary residence in this market

Detroit, Michigan
First-Time Home Buyer
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Having trouble purchasing primary residence in this market

Nader Hachem
Dearborn, MI · Member since 2019 · 124 posts · 41 votes

Hey all,

Im currently looking to purchase my first my primary residence by October. The market where I’m at just seems to be even more competitive than everywhere else. I’ve put multiple offers 40K over asking, waived inspection and appraisal in some cases but just keep getting ridiculously outbid. With rising interest rates, I simply can’t play a bidding war with others unless I want to spend $2500 a month on a starter home payment. 

What ways are there to get advantage over others? Are there ways to find off market deals? Worth going door to door and passing out letters?

When would rent be worth it? Seems like rent itself is also $2,000 a month and I’m worried that money will just be lost in a few years with nothing I’m return. And there’s also the opportunity that I lose appreciation if I did purchase a house 

To make it clear, I’m in metro Detroit michigan and this will be my primary residence not an investment 


thanks! 

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Lawrence Potts
Real Estate Agent · Member since 2018 · 459 posts · 414 votes
4y

@Nader Hachem

Hey Nader,

There are a lot of things you can do try to do to "beat the competition." Make sure you're pre-qualified, shorten closing periods, etc. But if you're having a hard time beating them, why fight it? What is your agent doing that makes them a better choice than other agents if he's playing the same game as these other guys? Has he called up expired listings that fit your criteria? Is he cold calling off-market potentials? Have you guys calibrated your plan at all? Adjusted to the competition? I can say that some of my clients are getting deals because we don't even worry about the newest thing hitting the market: we'll target houses that have been on the market for +30 days or so and we can get contingencies. There are deals out there, you have to make them. You can try cold calling too! Or send out mailers. Or go door knocking. Or calling property managers. Or going to REI meetings and asking people if they have anything they'd be willing to sell if the price made sense. Or calling title and getting a list of all non-owner occupied homes in a specific neighborhood and contacting them. Or talking to real estate attorneys. Be creative and make sure your team can do the same. Hope that helps!

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    4y

    If what you're doing isn't working, then yes, try something else!

    [email protected]248-209-6824
    Logical Property Management4.9458 Reviews
    WebsiteView Page
    1Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    4y

    How experienced is your Realtor? That makes a difference in multiple offer situations. Sounds like your terms are generally favorable, sometimes it's just a matter of time before one clicks if you are making aggressive offers. Here are a couple other ideas: Get preapproved rather than prequalifed- you can shorten your escrow period. Offer higher earnest money deposit and release half to the seller after you approve of the inspection. Offer flexible possession terms for the seller to get moved out, find their new home, etc. 

    A big part of this is your Realtor building rapport with the sellers and giving them confidence that you will perform. I can tell you that many realtors just email an offer over to the sellers without ever calling them and designing an offer that eliminates the seller's stress. No matter how great the terms are, if there's no context or communication behind it, it's probably not going to be accepted. 

    Good luck!

    2Reply
  • Jeff P.
    Livonia, MI · Member since 2017 · 40 posts · 9 votes
    4y

    Yep, it’s tough. I just got a client into a home- and we looked/offered for 4 months. As the poster above mentioned, realtor rapport may help. It sound like you are making strong offers otherwise.

    Have you considered an escalation clause where you will offer over the sellers best received offer by “x” up to a preset limit?

    0Reply
  • Nader Hachem
    OP
    Dearborn, MI · Member since 2019 · 124 posts · 41 votes
    4y
    Quote from @Jeff P.:

    Yep, it’s tough. I just got a client into a home- and we looked/offered for 4 months. As the poster above mentioned, realtor rapport may help. It sound like you are making strong offers otherwise.

    Have you considered an escalation clause where you will offer over the sellers best received offer by “x” up to a preset limit?


    I have done the escalation cause and that’s where we’ve had it up to 45K over !  

    1Reply
  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    4y

    @Nader Hachem are you working with a  reputable  realtor  for the  area you are looking ?  if not - you might consider this    1)  make your offer a  bit more than 40K ...another  10K wont make a  big  diff  on payment  3)  remove  all contingencies  4)  offer  a  quick  escrow period  5)  offer a large  non refunable earnest moeny deposit 5) offer seller a  free  rent back period  6)  get fully pre approved  and have your lender  call the listing  once your  offer has been presented in order to answer any  questions they  have on the offer ...good luck

    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    4y

    If you know places are selling over asking, then start looking at less expensive homes.  Be more flexible in what you are looking for.

    When you put in an offer, add an escalation clause.  So if the house is listed at $150K and the most you want to pay for it is $180K, put the offer in at $150K and the escalation clause says that you will beat any other offer by $1K up to a max of $180K.

    0Reply
  • Nader Hachem
    OP
    Dearborn, MI · Member since 2019 · 124 posts · 41 votes
    4y
    Quote from @Dave Skow:

    @Nader Hachem are you working with a  reputable  realtor  for the  area you are looking ?  if not - you might consider this    1)  make your offer a  bit more than 40K ...another  10K wont make a  big  diff  on payment  3)  remove  all contingencies  4)  offer  a  quick  escrow period  5)  offer a large  non refunable earnest moeny deposit 5) offer seller a  free  rent back period  6)  get fully pre approved  and have your lender  call the listing  once your  offer has been presented in order to answer any  questions they  have on the offer ...good luck

    One thing I’m hesitant about going too much over and not meeting my appraisal. Then I’d have to come up with my money in cash (which I can probably come up with but isn’t ideal), and it’s not like that appraisal gap builds any equity or goes towards anything. It’s more of a ‘poof and it’s gone’
    0Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    4y

    That sucks.  We all need to move to Ecuador for a couple of years and allow all the government stimuli and forbearance to burn off.

    3Reply
  • Nader Hachem
    OP
    Dearborn, MI · Member since 2019 · 124 posts · 41 votes
    4y
    Quote from @Mike Dymski:

    That sucks.  We all need to move to Ecuador for a couple of years and allow all the government stimuli and forbearance to burn off.

    Meet you there? 
    1Reply
  • Lawrence Potts
    Real Estate Agent · Member since 2018 · 459 posts · 414 votes
    4y

    @Nader Hachem

    Hey Nader,

    There are a lot of things you can do try to do to "beat the competition." Make sure you're pre-qualified, shorten closing periods, etc. But if you're having a hard time beating them, why fight it? What is your agent doing that makes them a better choice than other agents if he's playing the same game as these other guys? Has he called up expired listings that fit your criteria? Is he cold calling off-market potentials? Have you guys calibrated your plan at all? Adjusted to the competition? I can say that some of my clients are getting deals because we don't even worry about the newest thing hitting the market: we'll target houses that have been on the market for +30 days or so and we can get contingencies. There are deals out there, you have to make them. You can try cold calling too! Or send out mailers. Or go door knocking. Or calling property managers. Or going to REI meetings and asking people if they have anything they'd be willing to sell if the price made sense. Or calling title and getting a list of all non-owner occupied homes in a specific neighborhood and contacting them. Or talking to real estate attorneys. Be creative and make sure your team can do the same. Hope that helps!

    3Reply
  • Lawrence Potts
    Real Estate Agent · Member since 2018 · 459 posts · 414 votes
    4y

    @Corby Goade

    This is gold! I always call the listing agent prior to making an offer and after. First to figure out what’s most important for their client: quick closing, if they’re doing a 1031, how many offers they have in hand, etc. Second to confirm they got my offer (all of these ideas are from David Greene’s Book!) Good point!

    0Reply
  • Lawrence Potts
    Real Estate Agent · Member since 2018 · 459 posts · 414 votes
    4y

    @Jeff P.

    Escalation clauses are super helpful in multiple offer situations. That’s creative, good work 👍 it helps protect the buyer’s from overspending

    0Reply
  • Nader Hachem
    OP
    Dearborn, MI · Member since 2019 · 124 posts · 41 votes
    4y
    Quote from @Lawrence Potts:

    @Jeff P.

    Escalation clauses are super helpful in multiple offer situations. That’s creative, good work 👍 it helps protect the buyer’s from overspending

    Question about escalation. Say I put 250 escalates to 280, and they take my escalstion for 265… do they automatically go through with it or do I basically have to approve the appraisal ? 
    0Reply
  • Johnny Napier
    Investor · Hayes, VA · Member since 2017 · 26 posts · 23 votes
    4y

    @Mike Dymski I agree with you. I like Ecuador but family is here. I also agree with waiting a bit. Weighing the housing shortage and rising rates, prices will moderate as fewer folks will qualify. The price you pay today is what you're stuck with and we investors all know that profit or equity is made when you buy. You can refinance to a lower rate down the road but you can't decrease the price you paid.

    0Reply
  • Michael Lewicki
    Specialist · New York, NY · Member since 2021 · 24 posts · 9 votes
    4y

    @Corby Goade

    You are 100% on the money. I kept getting outbid in SC for an investment. I realized it was the realtor, when I switched it made all the difference. If nothing seems to work, try a realtor that you will work better with.

    0Reply
  • Adrian Valdez
    Real Estate Agent · Muskegon MI · Member since 2022 · 10 posts · 2 votes
    4y
    Quote from @Nader Hachem:
    Quote from @Lawrence Potts:

    @Jeff P.

    Escalation clauses are super helpful in multiple offer situations. That’s creative, good work 👍 it helps protect the buyer’s from overspending

    Question about escalation. Say I put 250 escalates to 280, and they take my escalstion for 265… do they automatically go through with it or do I basically have to approve the appraisal ? 

     Hey Nader! I'm a Michigan realtor out towards west Michigan! With an escalation clause you are agreeing to pay whatever you need to to outbid an offer up to a certain dollar amount (usually as long as they provide proof of real offers that's up to you or your realtor to verify) However lets say you offer 45k above asking on a $200,000 home. Appraisal comes in at $215,000 but your offer was $245,000 You are not automatically on the hook for the difference. At this point your realtor will negotiate with the listing agent to try to get them to take the appraisal price, At this juncture the seller may back out if they decide it is not worth them to sell it at that price.

    One thing you can do in the current market (it can be in combination with an escalation clause) is offering what's known as an appraisal gap guarantee. This is to say if the appraisal comes in low , while you aren't willing to pay a endless difference you will pay up to a certain amount. I usually recommend 2-5 thousand minimum This usually makes your offer much more appealing as most sellers in the current market are expecting a 40-60k loan offer to not hit appraisal. for instance

    appraisal gap guarantee : 5,000

    Offer price: 250,000

    appraisal price: 215,000

    in this situation the apprasial came in short. Now that appraisal gap guarantee means the seller will get 220,000 ($5,000 out of your pocket) to lock in the deal. 

    Another good tactic is to stay away from clean numbers on your escalation clause. People in general like to move in 5's so if you would offer an escalation up 40k, go 41k instead or instead or 45k offer 46k. I have had land me the deal in the current market in more than one occasion! 

    I hope this helps! if you ever need any help in west Michigan or have questions in general my contact information is on my profile!

    2Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    4y

    @Nader Hachem Tell your Mortgage Broker to call the listing agent. It works wonders when the person helping you finance the property is convincing the listing agent that you are an overqualified buyer! 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    0Reply
  • Nader Hachem
    OP
    Dearborn, MI · Member since 2019 · 124 posts · 41 votes
    4y
    Quote from @Erik Estrada:

    @Nader Hachem Tell your Mortgage Broker to call the listing agent. It works wonders when the person helping you finance the property is convincing the listing agent that you are an overqualified buyer! 


     Does a pre-approval letter attached to the offer replace the need for this? Or is this additional to that?

    0Reply
  • Gil Cohen
    Investor · Detroit, MI · Member since 2020 · 19 posts · 6 votes
    4y

    That's a great question @Nader Hachem to ask about renting vs buying. If you believe RE prices would keep going up and you're key on living in a certain area, renting likely be the better call. If you think prices would go down and a monthly mortgage payment would be much higher vs paying rent, perhaps renting is your better option for now. Remember that purchasing a primary residence is still paying rent, just paying it to yourself. 

    0Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    4y

    Find a new realtor. A good agent will be friends with the other agents and also know strategies such as escalation riders to get you a property.

    Look at house hacking! Should get you much lower payment out of pocket. There's duplex 2 story owners unit buildings that feel like a single family. 

    0Reply
  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    4y

    Your lender true approval should state it can close in twelve days. Go lower in price than you have been making offers by $50000 lower. Have enough cash to make up for the appraisal gap and disclose this to seller agent by showing the bank statement with account number whited out. Your agent needs to find out what the particular seller wants before you write (if property occupied allow them to rent back with big jump in rents in 90 days). If list price is $250000 offer EMD of $25000. Be available 20 hours a day when you get into contract and communicate. Have property inspector already paid and ready to run. Don't offer on condos or townhouses with HOA that takes time to get documentation. Go inside the house the day it comes on the market. Use your cell phone to video to remember. Your agent needs to be in the business in that market minimum five years. Agent must answer phone in ten minutes 9-5 and in hours at night. Agent is not going to drive you around after you made several offers. Buy the agent treats (a cookie, a latte, or something kind). Be calm and businesslike. Is your agent loved and respected by peers? Then the lender - lenders are laying off, merging, and closing. Find out how solid they look to listing agent (do they call the listing agent to sweet talk them?). Listing agents are not answering their phone. Listing agents don't care about your love letter or anything but getting it done fast, highest price, and they make the most. Will your agent accept 2% and offer them 4? Make more offers. All I need is one hit and my batting average is .001.

    0Reply
  • Adrian Valdez
    Real Estate Agent · Muskegon MI · Member since 2022 · 10 posts · 2 votes
    4y
    Quote from @Nader Hachem:
    Quote from @Erik Estrada:

    @Nader Hachem Tell your Mortgage Broker to call the listing agent. It works wonders when the person helping you finance the property is convincing the listing agent that you are an overqualified buyer! 


     Does a pre-approval letter attached to the offer replace the need for this? Or is this additional to that?


     You will need the pre-approval letter. I think what they were referring too (let me know if im incorrect.)  is sometimes if the lender calls them and lets them know a bit about themselves and reassures them you are good for the amount you offered (as many preapproval letters remove dollar amounts) it reassures them you are a safe offer to take. I typically only go this route when they have never heard of my lender or if we are using something like MISHDA down payment assistance. 

    0Reply
  • Anthony L Amos Jr
    Real Estate Agent · Columbus | Toledo · Member since 2019 · 607 posts · 768 votes
    4y

    Have you considered a FHA 203k Loan? You find a property that needs some work and the loan will finance the rehab. Furthermore, in this market you have to get creative and work with local realtors who also have the ability to find off market properties and are educated in creative financing.

    0Reply
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