Three Investor Tactics to Help Retail Homebuyers in a Hot Market

Minneapolis is a hot real estate market.  Inventory is at (or near) record lows, meaning that home buyers have limited options and lots of competition.    

The traditional list of tips for homebuyers in hot markets includes:  make cash offers (if you can), line up your financing in advance (pre-approval), make offers quickly, consider waiving contingencies (inspection or financing).  include a personal touch (a video or a handwritten note to the seller).

But homebuyers in tight markets can do more,  taking some approaches from an investor playbook could help you find your next home. 

Make a strong cash offer now but refinance later.    Buyers with the ability to do more than %5 down should explore purchasing with the largest possible down payment;  many sellers view these offers as the stronger offers.  But not everyone is in a position to purchase a home with cash or a large downpayment, and many buyers who are in that position understand that investing large amounts of cash is a missed opportunities for leverage and that hose funds are better invested in other ways.    Buyers who put large downpayment or cash offers as a tactic to purchase the property should explore a refinance later, getting that cash back to use for other investments.  This approach is similar to the BRRR model used by many investors.   Consult with your lender on their maximum loan-to-value and seasoning requirements, and other terms to see if the cash now/refinance later might be right for you.

Take a few steps outside of the retail market.  Most retail buyers aren't comfortable taking on large rehabs, start lead generation programs, or begin showing up at county courthouses for auctions.  But taking small steps outside of the retail market could open up opportunities. Some auction properties allow for interior access and financing.   Start by visiting Auction.com and Hubzu.com and review listings in your area for access and financing options.  City owned property programs like those in Milwaukee and Minneapolis often allow for interior access, financing, and in some cases, incentives for purchases.   Some Homepath properties accept offers from owner occupants only in the first weeks, allowing some time to get offers in before investors.  Smart home buyers should ask their agents to take some basic steps to look for properties proactively, including direct mail and digital advertising to find sellers.  Remine and other tools can help agents identify likely sellers in a target market and be more proactive about finding properties.  

Make offers, not appointments.    Traditional retail approaches have buyers looking at scores of properties and making a few offers.  Smart investors do the opposite, taking the time to define what they want and make offers quickly, including a reasonable inspection contingency.   Yes, that means making offers before visiting other properties.   To avoid a multiple-offers scenario where the listing agent uses your offers to shake others loose, make a strong offer and add an expiration date.

Taking a few tactics from an investor playbook could help buyers in tough markets increase the chances of finding a home.   If you're in a tight market, explore the cash now/refinance later (a version of the BRRR program), take a few steps outside of the traditional retail market and explore online auctions and city owned program.   Agents should do more than just shuffle papers, they should be proactively contacting potential sellers in your target neighborhoods.   And instead of making appointments, make offers - move quickly and make offers on properties immediately, including an inspection contingency to allow you to cancel your purchase agreements if you find concerns during the inspection process.

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