All buyers should get pre approved with a local loan agent or bank. It puts you "in the game" with all of the other potential buyers. You just need to be patient because the banks have their routine they must follow. Be prepared to offer your highest price that is comfortable for you. The banks are in the driver's seat and they are looking at their "bottom dollar". Thank you. diane.rooney@century21.com

I totally understand your frustrations! Unfortunately, the Sonoma County market is currently holding one and a half months worth of inventory, according to the latest statistics posted by CAR. A normal market in our area is about 4 months of inventory. You are also in one of the most competitive price points. There are many cash buyers/investors who love grabbing homes in this price point. I just closed a loan for my clients after a year of home searching and 15 declined offers! I have to agree with all of the other answers. Hang on and be patient. It looks like you have a great real estate agent who's hanging in there with you.

A,
I understand your frustration. You are in the hottest price point in Sonoma County. Multiple offers and bids above asking are par for the course. It is a VERY competitive price point. Magda and Keith gave you some great answers. You need to be ready to pounce because these houses are going so fast. You can not wait 2 to 3 days.

You may want to look at short sales too. They are not a sure thing but you will face less offers potentially. Check with your lender and see how fast they can close FHA. If they can close it faster than 25 days use that in your offer also.

Ask your agent to check the data of recent sales around $250,000 . For each sold property, the MLS provides the listing price and the sale price, the type of payment (cash, conventional, FHA, VA), the concessions, if any, from the seller, and duration of escrow. That might give you an idea about the competing offers out there.
Here are few other things to consider when writing an offer:
a) Loan approval letter with proof of funds for down payment;
b) Highest down payment you can afford;
c) Do not ask for credits in the offer (negotiate later);
d) Do not request Wood Destroying Pest Inspection in the contract;
e) $3,000 initial deposit;
f) $5,000 + increased deposit after release of inspection contingency;
g) Loan contingency removal in 25 days(ask for extensions if the loan hasn’t been funded);
h) 30 day close of escrow (work w/extensions if you need);
i) Write a nice letter to the seller explaining why you are a solid buyer (show work and financial stability).

In general, sellers don’t like FHA financing because, to be eligible for FHA financing, homes must comply with HUD’s Minimum Property Requirements. Ask your lender what those requirements are and stay away from homes that need a lot of fixing.
Good luck!

A
What I sense here is that you are working without a plan. Many times the Realtor who represents you simply is unaware of the big picture. They are doing their best, but may lack some training. If you like them stick with them, but you might want to ask to speak with their broker so you can brainstorm a little.

Some suggestions:
1. You need to know the market in which you are working. Please see the link below. It shows that there are 612 homes on the market and over 2,000 "recently sold". There is a specific name for this ratio. It's called "the absorption rate". Take the total listing inventory, divide it by the number of homes sold last month. A balanced market is six months of inventory. In my market we have about three months. Your market looks like even less.

Why is that important? Because this explains why you are hitting your head against a wall of buyers with multiple offers. With very low absorption rates, even over-priced listings may have multiple offers. This causes problems with appraisals. Compared to a year ago the Trulia link shows prices dropped 7%, but I'll bet if your Realtor pulls some comps you will see that the actual price per square foot has been going UP since January.

Wouldn't it have been nice to know when you first got started the market that you have? While you've been running around writing offers the Absorption rate has been declining, probably from 4 or 5 months to one or two. If you had known earlier, you might have been more aggressive, but now, to be candid, you might be priced out of the market...unless you get creative and lucky.

So you need to sit down with your Realtor, find out the Absorption Rate, and really stategize:
1. What is your absolute max price?
2. Are there any homes that are "back up offer "status that you can write a back up offer...and get a counter stating such? I just closed on a house for buyers...we were a back up offer, it was a short sale, I called everyone week for two months...they finally got it.
3. Are there homes with long market time that are overpriced you can check out and write a low offer....but justify the price.
4. Are there homes that have expired (listed and not sold) that your Realtor can approach the owner?

5. Does your Realtor talk with other agents in their office about listings that are coming on to the market...before they hit the market?
6. In a multiple offer situation, are you submitting a complete offer? Proof of downpayment funds, copy of deposit check, cover letter from you, from your REaltor, from the lender? Do you know why your offers are not being accepted? Does your Realtor call to see why the seller is selling and what they need, what length of escrow, any special circumstances....does your REaltor try to establish rapport with the Listing Agent?

Good luck. Only with persistence, a plan, and luck will you be successful in a strong seller's market unless you have a lot of money and are willing to pay over list price....even if the appraisal comes in low.

One more suggestion that I think is relevant is you need to make sure you are looking at properties that are actually in your price range as well. I know something can be listed in your budget, but many properties, as you are well aware, are bidding up much higher. You need to be able to anticipate how high you think a home will go and then evaluate if you are perhaps looking at ones that are unrealistic. Your agent should be guiding you with this and using comps to show you which neighborhoods and areas are within your reach. And guiding you away from ones that aren't realistic so you can really focus your efforts and not get discouraged. I think this is step one to your success.

Your FHA loan does make it a little more challenging to compete with offers that have more money down. Also, if you are asking for a closing cost credit as well, which you didn't mention but I am just adding that in case it's relevant, that adds another degree of difficulty. But it's certainly not impossible. You just need to be dilligent, see properties immediately when they come up and be ready to pounce. As the others mentioned, the right house will come along and everything will work out. Being able to buy at these great prices just requires a little extra work. Best of luck to you!
-Shannon

One strategy I encourage buyers to pursue is to USE THE LENDER WHO OWNS THE REO!! Many agents don't wish to do this as they are loyal to their lender friend. I retort--"Is your fiduciary to your Lender friend or your client the BUYER?" We've found that FHA loans will become more and more favorable to the big lenders who are heavily into the REO and Short-Sale markets. And cash is NOT still king for many Asset Managers. I would write ON THE HIGHEST AND BEST FORM--"Please NOTE--we are USING YOUR LENDER for THIS Transaction!" This is a coveted prize for the REO agent to relay to their lender who is assigning the REO's! The more "conversions" the MORE the REO's an agent will get! Keep this ONE STRATEGY in mind. Tell your Realtor/Agent they owe YOU their allegiance and support--NOT THEIR LENDER!

Hi A,

It sounds like you are trying to buy a short sale or REO property. If this is the case, then it explains a lot. The banks are looking for the highest and best offers. A higher down payment could help improve your position, but I would suspect that if you are getting outbid, it may be because of cash offers or conventional loans with 25% or more down.

Short sales and REO properties are tough. They take a long time and every one is different. If the inventory is low for the price point you are at, then it's understandable that you have been getting out bid.

FHA loans can be done on short sales and REO properties, but the requirements are different than conventional loans and the banks may not want to deal with them.

FHA has stricter guidelines in order to make the loan happen. If you can afford a higher downpayment as I think Patrick mentioned, try submitting an offer with conventional financing.

Cash really does talk with bank owned homes if this is what you are after. But even the regular homeowner might turn down FHA as they dont have the $ to fix things they would have to for FHA. So look into 203 renovation loans with your agent and lender.



Sean Dawes

Thank you, Karen, Sean and Kirsten, for those excellent points.

Sean: Why is FHA financing looked down upon? is it because it's such a low down payment? Is it really that common for first time homebuyers to have huge sums of money for down payments?

Kirsten: Yes, we're asking our offers to be held on to in case something falls through.

Karen: We are both relieved and disappointed about the extension of the housing credit. We are hoping the extension relieves some of the pressure of competition, and are happy that we'll likely be able to benefit from it.

how hard it is to be working so hard to buy a house. I think that since the homeowner tax credit has been extended that perhaps buyers will be able to slow down and only offer what makes sense and only offer on houses they really really want. We have had so little inventory in your price range that it is dificult- Good luck- the right house will come and you will be homeowners and be glad in years to come that you were able to buy at these price points- Karen
PS - for some strange cyber reason I was logged in as David Millar and didn't realize it when I answered you question. sorry about the confusion ...

Thanks, Patrick, for your answer. Would a higher down payment matter to the seller/bank? It wouldn't change anything for them, right? Is a higher earnest payment more attractive because it shows we're risking more, and less likely to back out? We've been asking for a 30 day close, should we be attempting something faster? Thanks for your feedback. I'll be talking to our agent about all of these things. She's been great, I just wanted to get some other perspectives, too.

If you are making offers on homes that are bank-owned, your competition is likely cold hard cash...and there's really not much you can do to position yourself as more desirable than that. REO's are going for quite a bit over asking in general and the most attractive buyers are those who pay cash and close quickly.
If you are making offers on short sales I advise you to hang around to see whether the buyers who had the prevailing offer actually follow through to close the purchase. Often they do not. If you are a lucky lurking buyer....you might get the home want with a second offer.
Good luck!

Didnt see anyone else mention this but are the other offers with different financing?

See if your agent can find out what the winning offers had in terms of financing. Some people do not like seeing FHA financing on an offer.

I know how hard it is to be working so hard to buy a house. I think that since the homeowner tax credit has been extended that perhaps buyers will be able to slow down and only offer what makes sense and only offer on houses they really really want. We have had so little inventory in your price range that it is dificult- Good luck- the right house will come and you will be homeowners and be glad in years to come that you were able to buy at these price points- Karen

You need to find out what you are up against regarding the other offers out there. What are sellers looking for? Are others coming in with higher down payments, quicker closing dates, more earnest money, things like this.

You mentioned that you have been outbid on about 4 houses so far. There is not much you can do about that. You can only offer what you have to offer. It may seem to be discouraging but hang in there. You will find the right house that works best for you. Good luck.