How to make offers when you plan to figure out financing after your offer is accepted?

Question

I thought if I have a good deal under contract, it won't be a problem to find private lenders to sponsor it. That was my thinking. So I focused on finding deals. I recently found 2 flip deals. Then came the dilemma: how do I make my offers strong w/o proof of funds and what type of funds do I say I have: CASH, LOAN? I have nothing right this moment, but I will as soon as my offer is accepted at the right price.

How do people get deals without money and then finance those deals? I understand the theory behind it, but how could you actually submit an offer w/o POF and compete with other 10 cash offers with proof of funds?

How do people get deals without money and then finance those deals? I understand the theory behind it, but how could you actually submit an offer w/o POF and compete with other 10 cash offers with proof of funds?

Julia Yagodina · Answer

Thank you. These are very good ideas.

Ryan Dossey · Answer

I agree with the above. Most HML will give you a letter of "approval"

Guy Gimenez · Answer

@Julia Yagodina

Build a relationship with a HML.  I've had a couple of them provide me updated letters every couple of months to use in the event I needed...which fortunately, I didn't.

This is a common issue when investors get deals from the retail arena (MLS) instead of the wholesale arena (off market).  I'm sure you can find some deals once in a while on the MLS, but your competition is sure to be stiff.  I've never had an unrepresented private seller ask me for a lender letter...they just want to know I can solve their problem.

Julia Yagodina · Answer

thank you Brandon. Great tips!

Julia Yagodina · Answer

thank you for your response.

Timing is another factor. I want to be able to submit offer fast and if not accepted move on, not bother private investors until I have something solid and under contract. Also, deals won't wait for me to go around and ask for money. I need to react fast.

CA is a very crowded lake. Just wondering if there are any creative ways in writing cash offers, but getting that cash after the acceptance. Please share if you've done it.

Brandon M. · Answer

I just closed on one today where I made an all cash offer and never showed POF. I ended up beating out 6 other offers, some of which were higher than mine. Takes a little more risk so I wouldn't suggest it for newbies, but some suggestions:

- quick close, 2 weeks for instance. If you are going to do this then you need to at least start the application process ahead of time, some HMLs might need that much time to close a loan.

-no financing contingency.

- no inspection contingency. You can mitigate your risk by bringing a contractor with you or finding someone who will do a cheap inspection for you. The sellers were also pleased I took my contractor with me to do my homework BEFORE submitting an offer.

- make it so that your money goes hard immediately. For mine I basically told them my $1000 in escrow would go hard immediately, meaning if accepted I have ZERO opportunity to ask for that $1000 back under any circumstances.

- offer to pay some of the seller's side of the closing costs. AKA sending them a net offer. Your offer is $50k they walk away with $50k, not $50k minus their side of the closing costs.

- I did send them the addresses of a few other properties I already own where most of my liquid funds are tied up and explained the issue to the agent. Whether he looked at them to double-check me or not I don't know, but at least he could see I was legit if he tried.

Even with all of these things you still have to be the offer the sellers choose, and these won't work 100% of the time. In my case the seller has a POA for a father who is almost deceased, the POA would no longer be valid if he passed before the closing so my quick close was what won them over, even more than the price.

Just a few suggestions to help strengthen your offer and help beat out others when you can't show POF.

Guy Gimenez · Answer

@Julia Yagodina

Financed deals will usually be hard pressed to compete with true cash deals, all other terms being the same.

Seems to me like your fishing in a crowded lake....might want to move your boat to a different one so you won't automatically be the underdog.

Christopher Andujar · Answer

You should speak with private lenders first. Explain to them what it is you want to do. Hopefully you have a business plan of some sort you can share with them. Once they decide if you are going to work with you and you figure out how much $$$ they are willing to lend then you should find the deals.

OR

If you already have the deal in place once again put it on paper so you can show the lender. Let them know what you want to offer along with what you will need for repairs and all the other technical stuff.

Hope this helps!