I held a house open Saturday and Sunday and was thinking about why some of the people looking for homes where so frustrated with their agents. The biggest frustration came from the amount of time most people had invested in looking for homes. The second biggest frustration came from the amount of offers they had submitted and were the unsuccessful bidders. I can relate because I have clients in the same situation. You hear of how great the prices are, of how it is the time to pick up steals. You also hear how terrible things are in real estate and that prices are bound to go down. The reality is different when you are out in the trenches. I would like for some of the journalists who write these articles to pretend they are buyers and actually look for a steal or ?deal?. I am going to outline what it takes to get a steal or deal, as well as what will keep you from getting one. Here are the 5 requisites to scoring an amazing deal.
1. Have an all cash offer with no contingencies.
2. Have an all cash offer with contingencies or a Hard Money Lender.
3. Have greater than 20% percent down and a higher price than all cash deals no contingencies and pre-approved.
4. Have 20% down contingencies and pre-approved.
5. Take on a house that nobody else has the stomach for or you figured something everybody else has not.
The most likely scenario is that all cash offers even if they are 10-17% below all other offers will be the listing agent?s favorite. The all cash offer closes quickly (faster commission), no bank approval (will not fall out of escrow), and no appraisals involved. Of course today?s real estate environment does not guarantee your all cash offer will win. Many buyers are looking for that steal of a lifetime and a few who bought from October 2008 ? June 2009 got just that. In the last six months all cash buyers are outbidding each other and raising prices to a more normal level of possible profits. There are a lot of people with money in the real estate market and they are making it hard for the rest of us to purchase the American Dream. These homes that the newspapers focus on as steals and deals entice us to buy. The reality is for the majority of first time home buyers with less than 20% down; the choice of homes is limited. The limited stock has created demand resulting in higher prices.
Here are the 5 reasons that will keep you from obtaining a steal or deal:
1. FHA buyer looking for a fixer. PERIOD
2. FHA buyer without all pre-approvals, source of funds.
3. FHA 203K buyer looking for a fixer.
4. FHA buyer taking too long to decide and offering low bids on properties.
5. Buyers bidding way less than comparable deals or steals.
You can see that the majority of ways to lose out on deals is being an FHA buyer. FHA loans are for people looking for a home that is ready to move in without need for repairs. Houses that are in this condition have both been bought and fixed by investors or regular sales (owner to owner). This fact is what keeps most people out of the steals and deals category. The few homes the banks have the foresight to fix and accept FHA financing therefore have multiple offers. This shortage of available FHA financeable homes is what has driven the market up. You might say that all these homes bought by investors will eventually come on the market and create a large supply. That is a possibility but when you have 10 offers on a property, even if you cut that in half you still have 3-5 buyers per house.
