Are You Ready To Make An Offer Today?By Paul Esajian on August 30, 2019
In the world of real estate investing it is essential to be ready when opportunity presents itself. In most cases, quality deals go to those investors who can act promptly in a moments notice. If you do not have all your financial ducks in a row you will miss out on prime opportunities. Even if you don’t envision a scenario where you will make an offer today, you truly never know what is on the horizon. This means constantly looking for financing options, updating your documentation and staying on top of your credit score. Something as minor as an outdated proof of funds letter can cause your offer to be dismissed. The more prepared you are to make an offer the more likely it will get accepted. Here are five actions you can take to ensure you are ready to make an offer today.
- Consolidate Assets: If you are considering making an offer you need to liquidate and consolidate your assets. You may be holding off on withdrawing from an account until you find a property, but this isn’t the best strategy. If you are going to eventually take the money out anyway, you might as well do it now. No seller wants to hear what you plan on doing a few weeks from now. On certain accounts withdrawing money can take several days to hit your account. Sellers aren’t going to wait, and you will most likely lose the deal. Why not take the money out now so you have it in place for when you need it? Even if it takes you several months money doesn’t go bad if it is not spent. You will still earn some interest on it, but more importantly it will be in place if you find a property you want to make an offer on.
- Update Prequal/Proof Of Funds: There are several different financing options currently available for real estate investors. Regardless of your preferred method of financing you need to be ready to act. Certain financing works better on certain deals. If you prefer to use traditional lender financing, you need to update your prequalification letter. If you want to get one step ahead of your competition you should get a preapproval instead of just a prequalification. This means supplying your lender with an updated paystub, accountants’ letter, mortgage statement and anything else they require. This information is sent to the lender and you are issued a real approval pending the specific property. This can expedite the process and knock a few weeks of the timeframe. Some sellers may find this appealing and give you a leg up over the other offers. If you are using hard or private funds you should always update your proof of funds letter. This is just a simple letter documenting that you have the money liquidated in an account, ready to use when you wish. Make sure the dates are updated and there is enough money to cover the purchase price and all the expenses.
- Stay On Top Of FICO Score: Everybody should know where their credit score stands at all times. With all the various credit monitoring companies available, there is almost no excuse not to have a clue what your score is. Whether you use hard money or a local bank your credit is often a key determination in the financing you are eligible for. Of course, traditional lenders find this number much more important, but it is still a consideration with hard money lenders. Unless there is a legitimate reason, you will have a tough time finding a hard money lender with a score under 600. Credit scores can drop for a variety of reasons every month. If there is an account that was erroneously reported late it can knock your score down without you knowing. Having monthly updates can help catch these errors and preserve your score without having to go through the process of repairing it.
- Multiple Lending Options: Do you have access to hard and private money lenders? As we stated, certain financing works better for certain deals. It isn’t the best strategy to obtain a 30-year fixed mortgage on a fix and flip deal. Even if you find a short-term interest only option with a commercial lender the rates, terms and fees may be excessive. This isn’t to say that hard money fees aren’t high, but with an established relationship there is more common sense to every scenario. In addition to a hard money outlet every investor should have a private money option as well. These are friends, family, co-workers and acquaintances that have capital and are looking to invest but aren’t sure where to start. You can partner up on a given transaction where both parties benefit. Having these people in place now, makes it easier to make the right offer when a deal becomes available.
- Find A Reliable Mortgage Broker: Mortgage brokers have access to loan programs that traditional lenders don’t. There are always new programs constantly hitting the market. The right program with reduced documentation, down payment and credit scores can open doors you didn’t know existed. You should have at least one local mortgage broker who will update you on these programs and get your deals closed quickly.
Don’t wait to get your financial house in order. Deals often come when you least expect it and you need to always be ready to make an offer.