â€œSuccess is the ability to go from one failure to another with no loss of enthusiasm.â€
Cash buyers don't always win....perseverance with a bit of luck helps.
Asking what the sellers want and what the sellers are like may reap some answers that will give you a clue to how you can position yourself in the best light.
For example, if you find out that the sellers are buying a house too, you can offer to give them free rent up to a month after close of escrow.
For sellers who are very attached to their home, write a personal letter presenting yourselves as people who will love and treasure the home that the sellers have lovingly cared for.
If you're writing an offer above list price, prepare yourselves to waive the appraisal contingency --- which is a promise that you will make up the difference between your offer and what the property appraises for. Sellers are so turned off when buyers deliberately offer much higher than list price, and then negotiate to reduce the price if the property appraises for less.
Presumably you have a realtor working for you. What does he/she suggest that you do?
The advantage you have over a cash buyer is that the cash buyers often try to get a discount. The reason they can get away with this is that so often people buying with mortgages do not close. Sellers many times are under the gun and can not chance it.
We offer the sellers a guarantee that we will close on time, and if we don't we pay their mortgage payments until it does. (terms and conditions apply)
So your offer looks just like a cash offer.
Now you have a 2nd advantage. People who have mortgages of course are resorting to making higher offers to get their offers accepted.
What we try to do is to come in close to appraised value, then we point the value based on comparable sales. Then point out that higher offers must have the difference in cash and be willing to do so. I recommend the sellers get proof of funds and an agreement they will close regardless in advance.
This raises your odds of getting your offer accepted quite a bit. We have one agent who uses us as a lender and has gotten 44 offers through this year, so it does work.
For a free no obligation consultation feel free to call me at 949-297-1207 or click on my picture to respond online.
For a recent listing, 9 buyers submitted an offer on the same property. All but one wrote for over list price. Five were countered. One of the buyers wrote a heartfelt letter addressed to the Seller --- the seller was touched by the gesture, not only because there is a letter, but rather, the buyer put into words things that meant a lot to the seller.
So when the seller reviewed the counteroffers, she didn't hesitate to pick the one with whom she felt the most affinity. That offer wasn't the highest offer, and neither was it a cash offer. But that's the offer that won against all odds.
By the way, this happens more frequently than you think.
I said it earlier. Asking what the sellers want and what the sellers are like may reap some answers that will give you a clue to how you can position yourself in the best light. So...before writing an offer, try to find out what the seller is looking for, what's important to the seller...and try to appeal to those needs.
Many Realtors have been trained over the years that FHA is a hassle and in fact there are some downsides, specifically for flips. Many lenders are very picky about property condition on FHA loans. In the market of multiple offers the last thing you need is for the seller to decline your offer because they assume there will be repairs. The other issue is that many lenders take 45 days to close an FHA loan vs. the typical 30 day conventional. This could put you at a disadvantage also.
On the other hand, you do have to make offers. I'm concerned that you say you "are waiting to hear back from our second offer made." So you've made one that wasn't accepted and now you've made a second? That's definitely not enough.
If you'd made a lot of offers, then it would be time to try a different approach. The typical advice would be to raise your offering amount and to strengthen your offer. And that's often OK.
Still, what I was getting at in my first paragraph was that you also have to look where other people aren't looking. Find houses that other people are overlooking...most likely because they aren't on the market (at least for sale). First, take a look at my blog on finding lease-options: http://bit.ly/findalease option Note: I'm not suggesting a lease-option. But look at the advice for people for finding properties that aren't listed for sale. Use the same techniques. Look for properties that are for rent; then make a purchase offer.
A lot of investors use direct mail, especially to out-of-town owners, to find properties. The out-of-town owner is likely renting the property. One bad tenant or bad experience--and they happen regularly--and the owner starts thinking about whether it'd be better to sell. Or the owner would like to sell but knows the house isn't in the best condition and the owner does want to (or isn't able to) do the upgrades. Yes, it means you might find an owner with yellow kitchen appliances and green shag carpeting. But at least you've found something with no competition.
Here's another suggestion I never see: Buy a home from a wholesaler. In real estate investing, a wholesaler is someone who goes out, finds a property, puts it under contract, then sells the contract (usually to a rehabber). The rehabber fixes the place up and puts it on the market. The first two transactions--original owner to wholesaler and wholesaler to rehabber--seldom appear on the MLS. Now, wholesalers will be reluctant to sell to you, but for the additional profit, they will.
Here's an example of how it works in my area. (And my area is very hot right now.) A wholesaler finds a house that, when fixed up, will sell for $500,000--maybe $40,000. The house needs a lot of work. The wholesaler puts it under contract for $215,000. He assigns (the contract) to a rehabber for $240,000 total--the $215,000 contract price plus a profit of $25,000. The rehabber rehabs the house and puts it on the market through the MLS for $485,000. It sells in a day. (And, yes, wholesalers are finding properties like that.)
What if you went to a wholesaler and offered $250,000? That's an extra $10,000 for the wholesaler.
Or another example. The house would be worth $300,000 fixed up. It needs $30,000 in repairs. A rehabber will pay the wholesaler a maximum of about $170,000. The wholesaler probably put it under contract for $145,000-$160,000. What if you came in and offered $200,000? That's an EXTRA $30,000 for the wholesaler.
Most folks reading this are going to say: A house in that condition won't qualify for FHA. Answer: Look into a 203(k) loan--an FHA loan that includes rehab costs.
How do you find wholesalers? Find a Realtor who's investor-friendly. He/she will know. Or attend some meetings at your local real estate investment association (REIA). You can probably do an online search for "real estate investment clubs Concord California." I just did and came up with a bunch.
So: Two keys to your problem:
First, make offers.
Second, look for properties where your competition (so-called "retail" buyers) isn't.
Hope that helps.
You make good money and have good scores.
It is prudent to work with the right Agent to help you
Get the home.
Clearly, you will have to write offers, loose many, but ivory likely have
1-2 come through.
Be focused, and plough on with a good Agent.
Also have all your documents and financing ready to pull the trigger. Some areas are subject to over bidding and you have to make sure that your offers are in line with the market.
Real Estate prices are not going to abate any time soon.
the solution to your situation is directly related to the dimensions of real estate in which your agent has experience. Most agents only experience is in the PPP arena and this works for the rountine buying and selling of real estate. As you have discovered, your situation, competing head-to-head with cash buyers at your price point, is frustrating to say the least and begs for unique solutions.
These solutions can be as simple as creating secondary markets and as complex are structuring a proportional seller financed option. What works best is dependant on the details of your situation, the existing market, agent resources and skills, and your level of comfort.
The less stressful and more easily understood would be the secondary market and the one that is most easly developed by your agent. Chat with your agent regarding this approach. Be aware, this approach is neither rare or uncommon, it is simply more effort and EXPENSE than many agents are willing to invest, ecpecially at low price points. After all, this is a businesss, not a hobby. See if you can piggy-back on existing efforts of your agent.
Be prepared. You agent WILL require a committment, that means you will need to sign a buyer agreement.
Ask your RE Agent to personally present the offers to the seller ( with Letter and story ), most will not allow this but it only takes One!
Make Sure you have a complete package when submitting the offer.
Offer to make up the difference of a low appraisal, within reason.
Make sure your agent is networking for Sellers who do not want to be on the open Market. Some people want to sell without the fuss.
Look for HUD homes that are only sold to owner occupied for the first 15 days, you need a Hud approved Broker/Agent.
Believe one of these will work and you will be living in the home you desire!
You might also check to see if a 5% conventional loan might be a better option for you in terms of what you can afford.
"Never give in--never, never, never, never, in nothing great or small, large or petty, never give in except to convictions of honour and good sense. Never yield to force; never yield to the apparently overwhelming might of the enemy."
Our team uses the spaghetti analogy: "If you throw enough spaghetti at the wall, something is going to stick."
Second, visit open houses in neighborhoods that you can afford and are looking to purchase in. Sometimes these open houses are attracting potential nearby sellers
Third, speak to your agent about your intentions on the above scenario and see how they can benefit the sellers if you were to help find a listing and potentially purchase that house.
Fourth, take a small (several week) hiatus from the home search, work on your overall happiness and financing. Let your real estate agent contact you when the right property hits the market.
More than likely you will purchase your future home through a real estate professional. I can tell you that your price range is the most difficult (detached single family property under $275k). The majority of investors are topping out at $320k with all cash.
Hang in there, work on eliminating that FHA loan by saving more of a down payment. Sellers want to see proof of funds these days, even if there is a loan.
Lastly, it seems that the market is slowing a tiny bit - it might be catching its breath - we're seeing fewer offers than a few months ago.
Here is a post that may be helpful:
Current Bay Area Market NOT A Bubble: Top 5 Buyer Recommendations