There is a clear lack of inventory on the market and incredible demand.
These conditions mean homeowners are in a great position to sell. Investors are finding it hard to acquire investment properties and are now competing not only with other investors but with retail buyers as well. Increasingly, retail buyers are making offers for homes sight unseen and often waiving appraisal contingencies for listed homes.
Whether you are buying an off-market property directly, from a wholesaler, or off the MLS, how can you be sure your offer stands out?
Move fast and make a fair offer.
Submit a fair offer quickly. Get your financing in order if necessary — get a proof of funds letter. In this market, you should also consider making an offer with an escalation clause, which means you’ll beat the highest provable offer by an amount, e.g. $3,000 and include a cap of up to $X amount, e.g. up to $150k. So if your offer is $120,000 and there is a higher offer at $130,000, your bid automatically increases to $133,000.
A less-experienced investor may think they are going to get a property for $20,000 less than what a wholesaler is asking for when this market means the wholesaler could end up selling it for $15,000 over asking.
Be easy to work with.
Make it a no-brainer for the seller and especially the wholesaler — be a reliable business partner to make this transaction go smoothly. If you make it as effortless as possible for wholesalers to assign their contract to you, they are much more likely to give you preferential treatment in the future. Many wholesale deals never get posted online or sent out to an email list; wholesalers just pick up the phone and start dialing their best contacts before resorting to posting the deal to a wider pool of buyers.
How do we work with potential buyers?
We look at the asset’s current market value, realistic after-repair value, and renovation cost to determine what we would lend. From just the address, purchase price, after-repair value, and estimated repairs, we can provide you with loan terms to purchase that real estate asset. We provide terms that are e-signable, and we can also provide a proof of funds letter for the deal in question.
How we lend:
For a real estate asset in excellent condition, we would lend on the purchase price. Like we did on this deal in Dearborn.
For an asset that needs improvement, we can lend on the ARV. No separate appraisals — we’ll pull our own comparables and do one simple inspection to confirm your estimates related to renovations. Like we did on this fix and flip in Hazel Park recently.
No capital needed when acquiring new property. We can cross-collateralize existing assets that you already own free and clear towards helping you purchase a new property.
We recently purchased a client’s residence and did a lease back for a client who is planning to buy a new home. This lowered their DTI (debt-to-income ratio) so they could qualify for conventional financing on their new home purchase and have immediate access to their equity for a down payment.