Many Sellers who are facing foreclosure are notified by their lender that they should try a loan modification, but the reality is that loan mods don’t work in most cases. Many lenders will deny them or agree to a loan mod that you can’t afford. The worst loan mods are the temporary arrangements, where the bank agrees to accept a reduced payment for 6 -12 months, and then pulls the rug from under you by canceling it after you’ve made all of the payments on time. Some sellers are able to successfully get a loan modification, but many are not. The reason being, if the banks made it easy, then everyone would do it. If you tried to get a loan mod and it didn’t work out, a short sale is your next best option. You can receive relocation assistance, get a fresh start and be ready to buy again in as little as two years.
In March of 2015 the average sale price was $669,824 and increased to $746,332 in March of 2016. This was 11% increase. The average amount of days that sellers waited to accept an offer in March 2015 was 43 days and decreased to 35 days in March of 2016. This means that sellers were able to sell their condos 19% faster. The amount of condos that sold in March of 2015 was 248. For the same period in 2016, 291 condo sold. This was a 17% increase in sales volume. This supports that sellers stand to sell for more money in less time in 2016.
When it comes to making offers in a strong sellers market like we’re seeing in the Spring of 2016, it can be very discouraging for buyers. The key is to first and foremost stay positive and to secondly focus on what you can control. With this in mind I’ve put together a list of 3 things every buyer can do to ensure their offer has a higher probability of success. Obviously the offer price is the first thing a seller will look at, but in addition to the offer amount, theses three strategies may have a significant impact on your offer being accepted.
Close in under 30 days – For many sellers, this can have a huge impact on whether or not they entertain your offer depending on the circumstances. For example, if a seller is relocating and needs to sell quickly, this will definitely make your offer more attractive. Some lenders may not be able to get it done in less than 30 days so be sure to confirm how fast your lender can get it done before submitting an offer.
Work With A Reputable Lender – When a seller reviews your offer they want to ensure they are engaging with a strong and credit worthy buyer. If you are a cash buyer, then you will definitely have a leg up on the competition as long as the offer amount is competitive. But if you are going to be using financing, make sure you go with a lender that has a strong reputation for getting deals closed on schedule. One of the fastest ways to lose out a home is by working with a “bad” or unknown lender. For example Bank of America has one of the worst reputations for delaying closings or denying borrowers after weeks or months waiting for a response. When the market was booming back in 2006, I had a client that had an approval with ‘Dream Loans Yes.com’. That was actually the lender’s name on the pre-approval. Needless to say, the buyer struggled to get an offer accepted. Most established agents advise their sellers against entertaining offers from unknown and fly by night lenders.
Put Down A Higher Deposit – Another aspect of your offer that can make it appear stronger is if you are able to put down a larger deposit. A buyer putting down 20% looks a lot stronger than a buyer putting down 3%. While it may not be feasible for you to put down 20%, a 10% down payment can help increase the strength of your offer as well.
In addition to these three strategies, you may also consider waiving your inspection and financing contingencies, but this should only be consider by experienced home buyers. While this can really boost your odds of getting an offer accepted, it could cost you your down payment or put you in a situation where the home you purchase requires more work than you are able afford.
Many first time home buyers may not know this, but a Bank of America Pre-approval letter is one of the worst approval letters you can use if you are looking to purchase a home. Many listing agents and sellers refuse to entertain offers from buyers with Bank Of America Pre-approval Letters. The reason for this is the time it takes for them to underwrite loans and provide updates. They may take 4 weeks to review a file and request extensions and then deny a loan. The combination of poor communication and their inability to close on time or close at all have led experienced agents to essentially boycott their services. If you want to submit a competitive offer, choose any lender but BofA and you’ll increase your probability of success!
When it comes to negotiating real estate deals, it comes down to 3 simple principles:
1. Evaluate The Deal
2. Make The Offer
3. Get at The Heart Of the sellers motivation.
Before you make your initial offer, you want to see the house and run your comps. Based on your exit strategy, you will be able to determine your max offer amount. Make your offer below your max offer price and see what the seller says.You don’t want to lose the deal but you want to make sure you get a good deal as well. Follow up with the seller if you don’t hear form them within 24 hours. Keep them engaged. While speaking with the seller, get at the heart of their motivation. It’s not always about the price, so be sure to ask why they are selling to see if you can assist them with their needs in return for getting the property at a discounted price.
The Boston Condo market continued to rise in the first quarter of 2016. Average sales value was up 3%, Median sales value was up 6% and Days to offer was down 17% from 42 days to 35 Days and the total sales volume was up 16% from 618 condos sold in Q1 2015 up to 715 in Q1 2016. Fueled by low rates and low inventory, buyers are aggressively looking to purchase Boston condos. We may be close to the peak, but the second quarter will provide a much better indication of where the market is headed. It is also important to note that the Q1 2016 increases may be due to the severe Q1 2015 historic winter weather.
When I speak to new investors looking to buy and hold real estate, one of the first questions they ask is what type of properties they should buy first. While purchasing a property that provides income potential is a wise investment, purchasing a multifamily is even better. If you buy a condo or single family and lose your tenant, you have zero cash flow. With a multi family you can carry it easier if you lose a tenant because you have multiple tenants paying rent. It is also harder to qualify for an investment property one you own multiple properties, so make the first one count by purchasing a 3 or 4 family with as little as 3% down. After your first purchase you will typically need 20% down for any additional investment purchases.
When it comes to flipping properties, one of the first things you want to look into after securing the deal, is the utility connections. This may sound odd, but many home that have been abandoned will require the new water, sewer, gas and electrical lines be installed from the street to the house. Obviously this is expected when you are dealing with new construction, but you should always confirm with the town or city when you are purchasing a distressed property.
299 W 2nd Street has been under construction for about 8 weeks. There were some delays due to the permitting process, but the framing is almost complete. The property is an attached single family and includes approximately 1500 Sqft, three living levels, three bedrooms and 2.5 baths. The developer is also working on adding a parking space, but that is still in the works.
When purchasing distressed investment property that is occupied by tenants or a previous owner that may have lost their home to foreclosure, one of the best ways to get them out is the cash for keys strategy. Cash for keys is basically offering the occupants money in exchange for the keys. While it sounds simple, the key to success has less to do with the money, and more to do with addressing the needs of a particular occupant. The first call they receive should not be from an attorney. Using your attorney too soon may cost your more money, time and aggravation. You want to start by approaching them and figuring out what they need in order to successfully find a new place. They may just want help finding an apartment or may already have plans to leave. Have the conversation and get at the heart of their motivation. If you can’t find common ground, then have you attorney take over. Typically, tenants want First, months rent Last month rents, and the Security deposit for their new place. Previous owners can be a bit more challenging as they are looking for a fresh start and may need more time and more money depending on the situation. Cash for keys works but new investors should be careful purchasing occupied distressed properties where there is no rent or income being paid.