In a Hot Market How to Win as an FHA Buyer

There are many clients of mine that we keep getting into a bidding war and we lose every time, and it’s something that becomes automatic in a hot market to turn down those FHA buyers. When is the right time to say enough is enough and I will wait, well, that could put a buyer into a hard time later this year or next year to find that home of their dreams. How to get over huddles that you face as a first-time home buyer using the FHA program.

Some things to think about when you are buying a home, and when you have a low-down payment. There are five bullet points that can help anyone looking for a home while using down payment that are lower than the conventional requirements.

1. Get a family gift: There are a lot of people that go to buy a home, and the family is willing to give some funds towards the down payment of a home. Some people I see do not ask for the help, or flat out will not use other people’s money when buying a home. I understand certain positions of relationships and different dynamics; however, this could be a make or break for the future homeowner (you). These gift funds can be used for the down payment, and then after the equity builds up in the home gift it back to your family. The equity build up could be anything from forced appreciation, or years of appreciation.
2. Using More Funds in Personal Account: The name of the game in hot markets are covering the spread from where the purchase price is and where the appraisal cames in. This means the more money in the bank the better for a seller and the buyer to weather the gap that needs to be made up. So, if the buyer is putting down only 3.5% and has 10% of the purchase price in their account, then you can write the offer up as having the extra funds in the account and putting down more if the appraisal does not come back at the right value.
3. Remove Appraisal Contingency: Well, most know it and we ever made some mention to it above, it’s that appraisal contingency to be removed to make everyone feel a little comfortable. What does this mean, well just like above, as a buyer really wanting the house above market value, it means no matter what, coming up to the purchase price with the buyer’s own cash and no negations with the seller. If the contingency stays in the offer, then the buyer can either back out, or negotiate with the seller to back off that offer number that was first agreed to.
4. Remove Loan Contingency: This one is a tricky one, just need to be on the same page with the lender on this one. Telling the lender to move fast and that there will be no loan contingency should not scare a confident lender. As most professionals in real estate know that the buyer can back out for anything when the inspection contingency is left into the agreement. If the walls are blue and a buyer changed their mind about that color being their favorite while in escrow and the inspection contingency is left in, the buyer can back out and get their full earnest money returned.
5. Increase EMD Significantly: There has been times when we have won a transaction with a high earnest money deposit of $50,000 or $75,000. Also, I have seen deals getting won when the EMD is $300,000 and the purchase price is the same as the EMD. Keep your chances high when submitting an offer, and high earnest money deposits show the commitment of the buyer to get the property into escrow and closed.

These are a quick run-down on how to get that offer accepted in a hot market when submitting an offer with a small down payment. The increase in odds to get something accepted on a home you want go up tremendously when a buyer has a competent agent and lender by their side, and these tactics can help get the dream home.