Reprint:Buying Multi in Worcester in the Current Environment 5.13.2019
Below is a reprint of an email I sent to investors over 2 years ago. Sadly things have not changed much. Other than prices continuing to go up and an increase in inventory. Today there are 84 Multis for sale, at that time there averaged about 40 on the MLS at any point.
Buying a Multi in Worcester in the Current Environment 5.13.2019
Many people are saying they are having difficulty purchasing a Multi-Family home in Worcester from the MLS. Here is the problem
First off there are 5 different types of buyers
- FHA 3% down who need the rents to be high to qualify with the 75% rule, they also need the house to appraise higher to wrap their closing costs into the deal
- Mass Housing 5% down also need the house to appraise high to wrap in closing costs
- 25% Down Investors who need Move in Ready or Rented properties
- 25% Down investors who have the ability to fix things up
- Cash Buyers
It is difficult to see the properties because they have tenants so a fully tenanted building typically goes through this process:
- House is listed on Wednesday or Thursday on the MLS
- This gets lots of people to drive by the property and many walk around the house which is problematic since the tenants may not even know it is for sale
- OH is scheduled for Saturday of that week
- Tons of buyers show up because they know that it may be the only time they get to see the house
- This activity drives offers and multiple offer situations
- Buyers are given a deadline to submit offers
- Seller has to go through multiple offers and try to figure out if the buyers can actually complete the deal with financing which creates pitfalls in itself
- Do they pick the highest offer which is often FHA or Mass Housing?
- Do they pick the Cash?
- Since the buyers are forced to make a quick decision sometimes they have buyer’s remorse and back out of the deal
- The key is to pick an offer you know is going to go through even if it isn’t the highest price
How do you win?
- Make sure you have your financing in place and your lender is aware you are offering, get as solid a letter as possible
- Make sure you really want the property and bid accordingly
- Do not expect to renegotiate at home inspection and make it clear to the sellers you are not looking to do so
- Waive the Home inspection
- Waive the appraisal contingency if you can
- Or buy properties that are not on the MLS so you can have a conversation