All Forum Posts by: Katherine Serrell

I am contributing to the problem yet you are suggesting the solution is price fixing among agents (which is illegal)? If agents did collude and say "lets all do 5k", what do you think would happen? Someone would offer 6k.. 

I am representing the best interest of my client to help them get what they want. All buyers have a different risk appetite. I present options - they make the call. I hate the due diligence fee just as much as they do. As mentioned, there are other ways to make an offer competitive. A good agent will structure an offer accordingly. 

Even when there has been a high DD amount on the line, I have still had sellers to replace major items (roof, sewer lines, structural work, etc) and/or given large credits when I have represented the buyer.  If the seller is worried their house will go back to market - they would have to fix or disclose these items anyway. Even if the seller could keep the DD, its often not worth the risk for the seller.  Ex: if the seller has a house under contract and they absolutely have to close on time.. they will work with the buyer on the repairs. 

Implying is that your offer is identical to the other offers on the table just with a lower due diligence is extremely misleading to anyone subsequently reading this post. If you are coming in with stronger terms (cash, quick close, etc) then that would merit a lower due diligence fee. 

If you work directly with the listing agent and they keep both sides of the commission and you dont get any exclusive representation as a buyer.. the listing agent would most certainly be happy to work with you and a lower due diligence. If you are an experienced investor in the local market, have the time, have boots on the ground, and can manage the deal and negotiation yourself without a buyers agent then awesome. That's not the case for most.  But hey - whatever works for you :)  

Unfortunately, I most certainly can imagine. When I went to buy my second househack, I had quite literally 12k saved up for a down payment that took me a whole year to save (I was fresh out of college). I put 10k as due diligence and sweated bullets all the way to the closing table. 

As an agent, I truly agonize over it. I try and get first time buyers to focus on properties that are "low-risk" ... if there are not really, really strong comps we avoid. It is just too much of a gamble. Sometimes buyers just want to play their entire hand anyway and then im back to sweating bullets all the way to the closing table. 

Who really suffers in this market are the first-time homebuyers who are using down payment assistance programs that simply dont have the cash at all to put upfront for due diligence even if they did want to roll the dice. It puts them at a significant disadvantage. 

An agent who suggest 5-10k in due diligence in Raleigh is only foolish if they are suggesting that without any basis or suggesting that when there were other alternatives to strengthening the offer.  For a well-priced property in North Hills, downtown, Five Points, etc that will likely be on the market for under 48 hours... 5-10k is likely too low unless you are a cash buyer or go way over asking. I have had multiple clients, including myself, who have submitted over-asking offers with competitive terms and a lower offer won just because the other offer had a higher due diligence. 

For major rehabs, tear downs, properties in less-desirable areas, the properties no one wants, or properties that have been on the market longer than a couple of weeks or so, 1-5k is definitely appropriate. It is a case-by-case basis. It ultimately comes down to how much a buyer wants the house and how long they are willing to wait to find something. I agree, it is a horrible process for buyers. 

 The easiest way to explain it is due diligence is a non-refundable deposit and earnest money is a refundable deposit - both go towards your down payment/closing costs. In NC, you can terminate the contract for any reason, or no reason at all, prior to the end of your due diligence period and your earnest money will be returned to you. However, your due diligence will not be refunded.

If the home doesn’t appraise, if the inspection report is awful, if your financing falls through, if you loose your job while under contract, etc. the due diligence is still NOT refundable. 

Due diligence is only refundable in the event of a material breach by the seller or if the seller misrepresented a material fact (which you would have to be able to prove that they knew about it and essentially lied). It is important to note that since the due diligence fee is literally a check, wire, etc that goes directly to the seller - and is not held in escrow - the seller can spend it on whatever they want immediately. 

For example - the seller can use it for their due diligence fee, pay off a credit card, pay off a medical bill, gamble, buy a bathtub full of gold, etc. the moment they receive it (normally the day after the offer is accepted). That said, even if you can prove that they lied about something… it’s hard to collect money when the money has already been spent.. 

As an agent and an investor, I’m doing everything humanly possible prior to submitting an offer to conduct as much due diligence up front to reduce as much risk as possible. 

Hope that helps!

 Over the past 2-3 months, my buyer clients have been offering anywhere from 2k-10k on homes in the 300-500 range depending on how competitive the specific property is and how strong the other offer terms are. Once the spring/summer frenzy sets in, that’s when this goes to more 5k-20k. There are several other ways to make your offer competitive here without throwing down a ton of due diligence but it’s case-by-case. 

Hey Erich! I am an local investor in Raleigh. Happy to connect and help in anyway I can.

 Yes, definitely feasible to get the seller to pay closing costs in this market. I serve the Durham/Raleigh area and I have had multiple sellers cover all (or most) of my buyer's closing costs. You just have to structure the deal correctly. There are also 1% down payment options in NC that my clients have been successful utilizing so you dont even need 3-3.5% for a down payment depending on your financial situation just an FYI 

- For non-owner occupied properties, you can expect to pay between 20-25% plus another 1-3% in closing costs. Some lenders offer 15% down loans but those loans typically come with higher fees and worse rates so you are normally better off putting down the 20-25% for non-owner occupied properties. 

Lastly, you are also normally required to have reserves. I have seen this range from 3-6 months of your payment amount. Ex: if your estimated monthly payment is $3,000.. you may be required to have anywhere from 9-18k in reserves. 

- For owner occupied properties of 2-4 units you can expect to pay as little as 0%-5% down plus 1-3% in closing costs depending on the loan product. 

Sometimes you can get the seller to pay these closing costs depending on how you structure the deal. 

Hope this helps!

Hi Silas. Congrats on getting started! That's how I got started as well.

Step #1 should be contacting a local lender. You can find references on BiggerPockets. There are many low down payment options available - especially for first time homebuyers. 

For example... I am an agent in Raleigh, NC and I recently had a client close on a 310k home and her cash to close was less than $2,000. It can be done. No one via the forums can give you specific, detailed answers without knowing the whole picture such as credit score, income, DTI, etc. To explore your options, you should reach out to a local lender.

Regarding looping in friends.. I would definitely not go that route for your first property. That could complicate what should otherwise be a very straightforward loan. Your friends would also have to sign a gift letter stating that they do not expect to receive the money back. 

Hope this helps! If you have any other questions feel free to reach out.

Hey Joe - Just messaged you. Happy to connect & help in anyway I can. I am a local agent and specialize in STR/MTRs in the area.