Rant - First time buyer not getting anywhere

Lark2013

I need to rant, and find out how others have faired.

DH and I are first time buyers and know what we can afford.  We've saved up a decent down payment, talked to several lenders, and even done a first time buyers class.  Our budget is small for this area, so the number of available homes is very limited, meaning that although we've looked at several homes, and put in four offers, none of them have been accepted.  Our agent always tries to find out why we didn't get it, and so far we've been beat out by cash offers (freaking investors!) and people who forgo the inspection/appraisal (who does that?!?!).  We know we will have to make some compromises, and are even willing to get a fixer-upper, but our city is in no way first time buyer friendly, and I'm starting to think we'll never find anything.  We don't want to rent anymore, but can't afford to up our budget right now.  Competing with everybody else who wants to live here/make a profit from flipping is getting really frustrating!

Anybody else experiencing this?  How many offers did you have to put in before yours was accepted?

jtmh2012

The flippers/investors forgo the appraisal and inspections because they don't need them.  They don't need the appraisals because they're using cash and have already researched the value.  They skip the inspections because they usually know what they're looking for and probably intend to gut the house and replace stuff anyway.

I've bought two houses.  The first time I put in offers on two houses before having one accepted.  In hindsight, I was glad the first two didn't go through.

The good news is that with the economy being what it is right now, it doesn't look like rates are going up anytime soon.  So take your time and in the meantime, keep saving what you can.

MommyLiberty5013

Also, I've been hearing a lot that house inventory is low. It could just be my area in Minneapolis, but it seems like a national thing. There just aren't a lot of homes for sale right now. Things will also likely pick up with the spring/summer seasons.

Have you looked into areas maybe 5-15 minutes further out that where you are now? Like in a neighboring county to the one you're in?

julieanne912

That's pretty much par for the course here in the Denver metro area, year-round.  The people who bought our old house had lost out on 3 houses before they got to ours.  I listed it at 7am, they came and saw it at 10am, and gave us an offer for 10k over asking by noon.  We had a handful more showings that day then accepted their offer that night.  And, that was almost 2 years ago, and it's gotten worse since then (and the value of that house has gone up 30-40k since... so their 10k over wasn't even an issue).

I also chat with buyers all the time (I'm in the title/escrow industry now), and many of them have gone through offers on 5-8 houses before landing one.  I had an agent tell me yesterday he had some buyers in a very desireable area buy a house without even looking at it.  They were out of state, and knew they wanted to be in that exact location and so they bought it based on the photos.  They also waived their inspection, and didn't see the house until they had owned it for a month.  

In a market like that, you basically have to put it all on the table with the first offer you put in... meaning, the absolute highest you can go, throw in some extra earnest money (it's easy to get back as long as you stick to your contingency dates), and yes, foregoing anything you're comfortable with foregoing.  If you're looking at fixers I wouldn't suggest foregoing an inspection though.  

Around here, while the market is always crazy, I think the slowest times are late summer, like August, and around the holidays.  At our office, our worst month of the year in terms of closings was November.  

ETA:  You might even want to look at escalation clauses.  Meaning, say the house is listed at 250k, but you'd be willing to pay 270k (and you/your agent is confident it can appraise for that much).  So, you write the offer for whatever, 250, etc., but then put a clause in saying you're willing to beat any other written offer by $1,000, up to 270k.  So if someone else offers 260k, your offer automatically bumps to 261k.  

Another tactic some buyers are using is saying they'll pay, say, up to 10k above the appraised value.  So say the house appraises at 255k, but you offered 270k.  By using that appraisal clause tactic, you would then pay an extra 10k in cash at closing to make the purchase price 265k.  This would be on top of your normal downpayment and closings costs though, so you as a first time buyer may not have that extra cash.  Also the seller would have to agree to lower the price to 265k.  Some will, some would rather put it back on the market and hope for better results with the next buyer.

julieanne912

Also, more experienced buyers feel comfortable forgoing inspections because they know what to look for.  I know if we were in the market to buy a house and it was competitive like that, I would feel OK foregoing a home inspection.  I used to be an agent and have worked with flippers and builders, and I've gone on 100+ home inspections.  I know what to look for for the most part.  So yeah, that's how people get away with it.

If a first timer is waiving their home inspection, well, they're not very smart.

short+sassy

I know it is frustrating but, don't give up, you will eventually find a house that works for you all and have your offer accepted.

Like the other PPs have recommended, as a first time home buyer, I wouldn't compromise on an inspection contingency.

I will give you one advanced strategy that will make you look like a cash buyer to the seller.  Get a hard money loan and then refinance the loan after it has been "seasoned" for 6-12 months.  The benefits are, those lenders have much more relaxed standards as compared to banks for underwriting.  As such, they can supply you with cash to buy a specific house in about two weeks.

The bad side?  Hard money=expensive money.  Depending on your credit score, you'll be looking at an interest rate of at least 7% and that's really on the low side for these types of loans.  They are typically more in the 9-12% range.  Hence the recommendation to refi as soon as possible.  The other bad side is they will usually only loan up to 70% of the ARV (After Repair Value) and they require at least a 20% down payment of the purchase price.  Often a 25-30% down payment.

But, boom!  You're now a cash buyer.  You might think the RE (Real Estate) investors just have that cash lying around.  And some might.  But a lot of them use hard money lenders to initially fund their deals.  They are more geared to investors, but there is really no reason a private home buyer couldn't utilize one.  In years past, they were primarily just for flippers, because the loans had to be paid back in 1-2 years.  That is actually what most hard money lenders still do.  But a few companies have now expanded to longer term RE holdings and have 15-30 year loans.

dfulton808

I could have written this myself 4 months ago. We live in a very similar real estate climate so we were facing the same struggles. All I can say is keep saving and hang in there! It WILL come along. It took me 22 months to find our home and we are absolutely in love, everything makes sense now why we had to wait so long. It WILL happen.

kmurphy2131

I'm a little late to this but you are not alone.  We put in four offers that got rejected before we got our fifth accepted.  We know for a fact (based on the realtor & sale information) that two of those sold for less than we offered.  So of the four: 2 we didnt get because we had too low of an offer (fine with me, I won't overpay), and 1 we didnt get because of our low downpayment (5%) & we wouldn't waive the appraisal, we don't know why we didn't get the other one (downpayment or contingencies).

We found a house that was less aesthetically pleasing but had good bones so we were finally able to offer on a house without competition. 

It's annoying because we got a committment letter for our mortgage literally 5 days after the P&S was signed.  Our financing was air-tight.  But too many people had concerns about our low downpayment.

dutchgirl76

We bought 4.5 years ago but faced the same issue, not a lot on the market and while we had what I think is a decent budget, our area is expensive and we were limited. The market in my area is much less right now since there was a big bubble of everyone buying and now you haev to stay there to make it worth it. Don't settle for something just to have a house, you're stuck with that house. I know it sucks to rent but it's worth getting a house that you want.

As PP's have said, look at another town if you can, unless you're restricted due to work or it would add a significant amount to your commute I can't think of many reasons to only buy in one town, but then again I don' tknow the crime rates and school districts in your area.

Lark2013

UPDATE:  We finally got one!  It took us 13 offers, but we finally did it!  We found two houses in the same neighborhood, both beautiful (granted one was AMAZING while the other was just nice).  We took a gamble and put in an offer on both (risky, I know, but with our luck, we figured we'd be fine...or we'd get both, just because Karma's a b*tch).  The amazing one went above our budget with escalations, but because so many people were focused on that one, not many put in offers on the other one, so WE GOT IT!!!  It's not perfect, but it's got character and it does exactly what we need it to.  So glad it's finally over.  Now I get to stress about how to arrange our new home  

jtmh2012

Congrats!

julieanne912

Woohoo, congrats!  

short+sassy

Congratulations!

Ugh, it's a real seller's market right now where I live also.  I've put in 8 offers over the last couple months, only to have 7 go to other bidders.  The 8th was listed 25% above comps.  Even though I made an offer slightly above comps, they still wouldn't take it.  AND that is why their condo that was listed eight months ago is still languishing in a seller's market, lol.

Granted, I go after rental investment properties, so it isn't quite as emotional as it is for a personal home.  But it is still frustrating and disappointing.  Hopefully some of your luck...more like perserverance (sp?)...will rub off on me.