How to buy in a seller's market??

[Kyle Pockat]

Hello all!

First time BP post here! I've recently relocated (somewhat temporarily) to Chicago but had been investing in the Green Bay area since 2012, focusing on buy and hold SFRs. The reason for my post today is not only to introduce myself and get to know some of the other investors, but to also get some feedback from the BiggerPockets Community in buying long-term buy and hold in a hot market. It's incredibly difficult to secure a contract on a property with all the right numbers when families are willing to overpay for almost any property. With being in Chicago, I'm not really looking to buy a property that would need extensive work. And, with only wanting to pick up 1-2 houses/year, I haven't found a wholesaler that will give me the time of day. I'm currently working a full-time and a part-time job so I'm not ready to try start my own marketing efforts. I'm hopeful there has to be a way to find a lead even in a hot market, but I'm starting to wonder if I just have to wait for things to cool down... my hesitation with waiting is two-fold: 

1) All the market trends and government fiscal policy indicate interest rates will only climb in the near future. With my W-2 income, I can still qualify for a 30-year fixed rate loan at 4.625% (a no-brainer in my opinion)

2) I have capital that I need to deploy and the measly 3% interest I'm earning simply doesn't compare to how those funds could serve me in the rental market. And as far as risks go, the only risks I'm willing to take are those in real estate (not into investing in the stock market until a lead comes my way). I'd consider a lending role, but would any investors would only be looking for $60-80k? And I wouldn't want to tie up that capital for long periods of time as I'd be hoping to invest myself!

I'm sure that I'm missing something and I would love to hear from anybody that's willing to shed some light on this for me! Thanks for your time and I'm looking forward to getting more involved in BP!

- Kyle Pockat, CPA

[Charlie MacPherson]

@Kyle Pockat The reality is that if buyers are willing to "overpay", they're probably not overpaying at all.  Any home is worth what a willing buyer and seller agree to.

In a strong seller's market like we have here in MA, here are a few tips to get your offer accepted.

1. Overpay.  Not crazy overpay, but if you're offering 93% of asking price in a market where the average home sells at 98% - 103% of asking price, you're probably not going to be successful.  

2. Have a strong pre-approval letter or proof-of-funds.  You need to convince the seller or his agent that you have the financial capacity to execute the transaction.  

If your lender has not already pulled your pay stubs, banks statements, W2s and tax returns - like the "instant" pre-approvals issued by Rocket Mortgage and Quicken - it's garbage.

3. Waive contingencies.  Of course, that carries a risk, but waiving home inspection and financing contingencies will make your offer far more attractive.  Be sure that your offer isn't contingent on the sale of another property - that's about the weakest offer there is.

4. Be likable.  People do business with people they like.  If you go in with guns blazing with all sorts of demands and treat the seller with suspicion, you're setting negotiations off on the wrong foot.  Just be a nice guy and keep your hostile thoughts to yourself.

I hope that helps!