Why NOW is The Time to Buy a House (BEFORE Rates Go Down)

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If you’ve been thinking about buying a house in 2024, you already may be too late. With mortgage rates dropping, listings increasing, and spring buying season only a short couple of months away, NOW is the time to act before bidding wars start up again. With so much pent-up buyer demand, agents and lenders are already seeing a spike in activity, and we haven’t even gotten to spring. So, if you want to know how to buy a house in 2024, even with fierce competition, we’re here to help.

Avery Carl, short-term rental expert and agent, and Caeli Ridge, President at Ridge Lending Group, join us to talk about what they’re seeing in the market NOW, what their housing market predictions are as buying season heats back up, and whether or not now is even the time to buy. Both Avery and Caeli work heavily with investors, so they know what does and doesn’t work when buying a rental property, NOT just a primary residence.

We’ll touch on the hottest markets that could see the most competition, why rookie investors need to snap out of analysis paralysis to win in 2024, and why this buying season could become red-hot in just a few months. Plus, David and Rob will answer a listener’s question about how to win in a competitive market without having the highest bid.

David:
This is the BiggerPockets Podcast Show 869. What’s going on everyone? This is David, your host of the BiggerPockets Real Estate Podcast. Joined today by the Quaff Crusader himself, Rob Abasolo. Rob, how are you today?

Rob:
Fantastic, man. I’m really excited to get into today’s show. We’re calling it “Why Buying Season is Now.” And I think we’ll really dissect some of the psychology and some of the watchouts and some of the things you should keep in mind if you want to buy a property today. We’re speaking with Caeli Ridge, who’s a nationwide lender, who specializes in lending to investors. We’re also talking to our good friend, Avery Carl. She’s a friend of the show. She’s a real estate agent who specializes in working with investors. Who would’ve thought?

David:
We’re going to be talking about seasonal strategies, if now is a better time to buy than waiting until spring when all of the other investors tend to hit the market and we see blood in the water.

Rob:
Before we jump into it, I did want to mention that if you’re looking for a lender or agent, we actually have a matchmaking service that you as investors can use to find investor-friendly agents and now lenders. We’ve already done the hard work of finding qualified agents and lenders, so you don’t have to worry about that side of it. All you have to do is the fun part of taking action and making deals happen. So if you’re interested in that, head on over to biggerpockets.com/agentfinder and biggerpockets.com/lenderfinder today. After we speak to Caeli and Avery, stick around for a special Seeing Green segment where we answer a listener question about buying in a hot market.

David:
Avery, Caeli, welcome to the BiggerPockets Podcast. Caeli, let’s start with you. How many markets are you currently in as a lender?

Caeli:
We are in 48 markets, David. We are in all but New York and North Dakota currently.

David:
Okay. And Avery, how many markets are you in as an agent?

Avery:
20.

David:
Okay. What markets do you two see are most active for real estate investors right now?

Avery:
I’ll go first. So we see right now our most active markets being our lowest price point markets. Typically, we see that because the difference in interest rate is a lot smaller on a $250,000 property than on a $1.2 million property in terms of getting into it. So we’re seeing our lower budget markets be a little more active than our higher ones.

Caeli:
I would say I’ve got maybe a slightly different lens coming from a lender perspective. And I think it’s going to largely depend on the individual investor’s core strategy. So short-term rental might, for example, be Florida. Florida’s laws are a little bit more lenient for short-term rental. The longer term rental, if the cash flow is the primary objective versus appreciation, they’re probably going to be in a landlocked state versus the sun belt states for that. So I think really, David, the answer for me is going to be most of them depending on what their individual strategies are and within the diversification that they’re going after.

Rob:
Sure. I have a follow-up question for you, Avery, because you mentioned some of the lower price point markets are where there’s a bit more activity. Can you give us a few examples of some of those markets?

Avery:
Yeah, So Branson super active right now, Myrtle Beach, and the Western North Carolina Mountains.

Rob:
Now I know both of you work with mainly investors, so I’ll start with you, Avery. What are you seeing from an investor’s sentiment at the moment?

Avery:
We’re seeing a lot of, “Well, let me wait and see.” So I think there’s a lot of people on the sidelines that are ready to buy, that maybe have come into our system and have been kicking around talking with our agents and things, but not pulling the trigger because they just are waiting to see what interest rates do, or really anything to shake loose, whether it’s interest rates coming down some or prices coming down some.

Rob:
Do you think if interest rates dropped, let’s say, 1% tomorrow, that would completely change the outlook or do you feel like investors at the moment are still a little bit scarred from the past year?

Avery:
It’s difficult to say. I think it would definitely make a big difference because something like 91% of mortgages right now, at least according to Redfin, are under the 6% marks. So as we’re recording this, they’re right around a little over 6.5%, like 6.4% I think was the last that I saw today. So we’re getting closer to sellers wanting to make some moves, but right now there’s just not really any inventory because when sellers list their properties, they then turn around and become buyers usually. So a seller doesn’t want to list a property when they have an under 6% mortgage to then jump to being a buyer at 8%. So it just doesn’t make sense. So I think if they went down a percentage point at this point, we would see some things start to move.

Rob:
Interesting. Yeah. So we’re a bit of a stalemate because you sell your property, where are you going to go? You’re going to then turn around and effectively have to buy a cheaper property at a higher price point to get something similar, is what I’m hearing. Caeli, what about you? What investor sentiment are you seeing right now?

Caeli:
Well, if I might, Rob, if it’s okay, just to interject, that when we talk about interest rates, and I spend a lot of time obviously talking about interest rates. In fact, that’s usually investors’ first question, “Where are the interest rates?” And I feel like there’s a real psychology attached to rates as it relates to real estate investing, and I know that it’s going to be far different if it’s their owner occupied, but we’re here to talk about investors. And the psychology is that they aren’t doing the math and they just hear the numbers and they’re listening to the soundbites on whatever their predilection for Fox or CNN or wherever they’re getting their information.
And if they were to take the time and do the math, I’m always trying to educate our investors to say, “Listen, the difference in an eighth or a quarter or a half or a full percentage point in rate, depending specifically on the loan size, might only be 50 bucks a month.” So just make sure you’re doing that math. It’s so, so important than just to be on the sidelines listening. But to answer your question specifically, Rob, I would say that, sentiment, investor sentiment, I think that I would differentiate two buckets here. I would say brand new investors are going to be more tentative in that higher rate environment and investors that invest and have been investing, they understand that the market is cyclical and rates will change and price points will change, and then they change their strategy accordingly, they’re going to figure it out.

Rob:
Yeah. Do you feel like investors right now in the market are actively looking for deals and transacting on them?

Caeli:
Absolutely. Honestly, our volume, well, yes, for sure there has been between 2023 and let’s compare it to 21, for example. Certainly there has been a dip in activity in acquisition and refinance, but I wouldn’t say that for us it’s as much as maybe owner-occupied transactions. Like I said, investors are looking at it from so many different facets, and if they’re doing it right and looking at it holistically, they’re not just looking at an interest rate of 8% and cashflow has to be three, four, $500. They’ve reset their expectations. They’re looking at short-term or two to four units. Maybe they’re looking at being private note holders, private lenders. The investor that has been investing or has been educating themselves is making their way through.

Rob:
Avery, do you have similar thoughts or sentiments on that?

Avery:
Yeah, yeah. So I do think that the people that we’re seeing transacting right now are typically going to be the more experienced investors. And I think that we are seeing a lot of people still have, being a little traumatized from 2021 and ’22. So I think one of our biggest coaching points for our clients right now is saying, “Just make an offer that works for you. Just offer at the number that works for you.” Because people are still feeling the pain of 2021 and ’22, where you had to offer asking price, you had to offer over-asking price. So what they’re doing is they’re just swiping left on all these properties because the asking price doesn’t work. And we’re like, “No, no, wait a minute. You can offer low. Offer as low as you want to go. You do not have a lot of competition right now. Let’s see what happens here.” And we are seeing people get some really good deals that way.

David:
Avery, as a real estate agent, when do you tend to see more listings hit the market?

Avery:
We usually see more listings start to hit the market in January. So March is when you really start seeing a lot more closings. As you know, David, with your team, January and February will be a little slow on the closing side, but March is when things really start to pop closings-wise, which means all the movement is starting to happen in January. A lot of people hold off during the holidays ’cause they’ve got a lot to think about with family and gifts and getting through all that. And then they start to either look for properties or list their properties after they get over the big headache of the holidays. So I think, at least with our clients, we are really trying to encourage our past clients to list right now if they have any interest in 1031 exchanging or trading up. We’re trying to get them to do that now because a lot of the analysts predicted that we wouldn’t see the interest rates that we’re seeing now until the end of next year.
And we’ve had a really good several week run of interest rates dropping sharply. And I think that if that continues, of course I’m not an economist and I can’t predict the future, but I think it’s probably going to continue on a downward trend, who knows how quickly, but to be prepared for this, we have a surge of buyers every January, just that’s how the cycle of the market works every year. So that coupled with this interest rates coming down faster than we initially thought, I think is going to be even a bigger spring than what we’re typically used to because there’s just so much pent up demand in the market right now.

David:
What are you seeing, Caeli?

Caeli:
I think Avery is right, and I think that myself included in the data, and I’m looking at this all day long, I don’t know that I would have predicted that, and I won’t get too technical, that the PCE that came out on November 30th would have promoted the rate reductions that we’ve seen for the last couple of weeks. So we are pleasantly surprised, I think, as a result of that inflationary metric. PCE, for those of you that are not familiar, personal consumption expenditures, that’s the one that the Fed Reserve focuses on most.
It came in favorable for inflation is on the run, rates are going to start coming down. The bad news is that rates fall a lot slower than they go up. So maybe we did get to see some boon or an incentive here as a result. I don’t know that I would say that I’m going to see them falling off a cliff, but I do think that that trajectory is on the lower slant. But remember, I said earlier, an eighth of a point or a quarter of a percentage point on $150,000 is 10 bucks. So put it into perspective and one more time for posterity, do the math.

David:
All right, so we’ve reviewed some cautious investors sentiment out there and some potential good news with future rates. We’re going to get into what that might actually look like in 2024 right after this break.

Rob:
We’re here with Avery Carl and Caeli Ridge to get both the agent and the lender perspective on if now is a good time to buy and what we expect to see play out in the 2024 market. It’s a very interesting psychology that y’all are both nailing both sides of it, which in my mind what I always see is, when interest rates are low, everyone is buying, everyone is putting in offers over asking, and thus everyone is discouraged and they don’t want to get in because competitive. And then now interest rates are high and competition is low, and those same people are complaining about interest rates being too high. So it’s always funny that there’s this flip flopping. And if you go back to the math and you math it out, yeah, it’s like it could be 10 bucks, it can be 50 bucks.
I feel like probably where a lot of the, I don’t know, some of the fear that’s coming in, Caeli, is that a lot of it comes from one eighth doesn’t make a big difference, but over the past year we’ve seen it go up quite a bit and so I think people are used to rates being in the threes or the fours and now the fact that they’ve doubled does have a pretty significant impact and I feel like we have to see those rates continue to come down before people are comfortable entering the market again, or I would say the masses.

Caeli:
Okay. And I don’t disagree, Rob, but here’s what I would say, a couple things. First, people have short memories. I’m in that grouping, okay? I can call myself out on that. The average interest rate and investors didn’t just start investing in 2021, ’22, ’20, right? That’s not when this happened. When rates were low, we got an amazing opportunity to get some great cash flow, but prior to that, the average thirty-year fixed mortgage rate is in the high sixes, historical average. So we have that. And then let’s not forget that as we move forward, and in talking about diversification and investors, looking at their portfolio, if they’re smart, they do have some diversification in their core, they’re going to have their core philosophies, but then layering in some other forms of real estate investing because the markets are cyclical and because they’re going to change is going to be very, very important.
And going back to, I know I’m beating a dead horse with the math of all of this, but remember if they’re doing it correctly, they’re not only looking at it from the monthly or annual return, what about everything else? All the other very tangible benefits of real estate investing, you’ve got your tax benefits if you’re doing that right, that should offset quite a bit of the interest rate because remember, at a higher interest rate, what happens to the interest deduction that you’re taking on your Schedule E? It’s going to be a lot higher than if it were a 4% rate versus a 6% or 7% rate. Appreciating rents, et cetera, et cetera.

Rob:
I guess with that, I’d like to turn it back to you, Avery, because obviously lots of changes happening, lots of sentiment from differing groups of people. And by the way, Caeli, I do agree, I do think our memory is short, but there is such a large group of people that broke in 2020 and 2021, they do remember the 2.75% and the 3.25%. It’s hard to forget. So with that said, Avery, as we move into Q1, tell us a little bit about what you’re seeing inventory wise and how are things sitting on the market at the moment?

Avery:
So I’ve been jokingly calling this year the great stalemate because buyers aren’t buying as much because interest rates are almost double what they were a year ago, and sellers are not listing because they don’t want to turn around and be buyers in a high interest rate environment. So what we’re seeing is incredibly low inventory. I think what a lot of people don’t realize is that, they keeps saying, “Oh, I’m waiting for the crash. I’m waiting for the crash.” It happened. It happened right underneath everybody’s noses, less houses were sold, fewer houses were sold in 2023 than in the past 15 years. Nothing has been sold this year. So as interest rates go down, I think that sellers are acutely aware people who might need to list, who are ready to trade up, get into other markets, other asset classes, things like that.
They’re really, really paying attention to the media and this interest rate news. It’s almost more important what the media says about it than what’s actually happening in terms of buyer and seller psychology. But I think as things continue to take down, assuming that they will, again, nobody knows the future. I’m not trying to instill any FOMO here. But I think as rates continue to take downward, we’re going to see sellers start listing and it’s going to be back to multiple offers again because again, there’s so much pent up demand that at least temporarily things are going to be really, really crazy. Maybe not 2021 crazy, but it is going to go back to a multiple offer situation until things even out a little bit.

Rob:
Yeah, it’s pretty interesting how some of these changes are pretty fast. I have a house listed in Houston and the moment that they announced that they were dropping interest rates, they did go down a little bit and my realtor was basically like, “Man, it was instant here.” And the amount of calls I got on this property just from the announcement, from investors really who are like, “Oh, rates are moving down, jumping in on it.” Clearly that’s anecdotal, but I’ve spoken to a few people who feel like, yeah, as rates go down, desire and demand go up.

David:
There’s a pattern there that you can recognize when it comes to real estate investing and it tends to be that the crowd moves as a flock of birds. I’ve always been of the opinion that buyers drive markets. What the buyers are doing depends what type of market that you’re getting. Sellers will typically be reacting to whatever buyers are doing, and buyers tend to move as one big flock. When rates go down, when you hear about other people buying houses and everyone thinks, “Okay, I need to get in there and buy a house.” And when nobody else is buying, it’s very easy to pull back and say, “Okay, I don’t want to buy because nobody else is buying.”
There’s this feeling of security that you get from following the crowd, which is how the normal casual investor is going to make their decisions. But when we interview people on this podcast and we talk to people that own real estate, they’re almost always contrarians. They bought when other people were not buying and maybe they sold when everybody else was buying. You see some of that. What’s your thoughts ladies on if people should be moving against the crowd or if it’s wiser to follow the crowd?

Caeli:
I would say that against largely is going to be more to their advantage more often than not. And not just for those two perspectives, David, but I get to see, because we’re licensed in forty-eight states, I do get to see the trends and there’s a lot of activity in this particular market, for example. As an investor, well, if there’s an opportunity there and the deal works, it works, but I may focus my sights on a place that has equal returns or better because I’m actually doing the legwork and the due diligence and the math, but I’m not oversaturated with competition in offers and I’m sure Avery’s got some insight about that too. So I would say that I would be going against the flock.

Avery:
I would say it really just depends on, the favorite phrase in real estate investing is, “It depends.” It depends on what each individual investor is looking for and needs. So I’ve seen great deals happen in environments where everything’s getting a thousand offers. I’ve seen great deals happen when there’s not a lot of activity going on in the market. So it really just depends on you as the investor and you just keeping on putting one foot in front of the other and keeping following that thread to find the deals because I think it’s when people just stop and say, “I am going to wait and not do this right now”, that they might’ve been one step away from actually getting that deal. And that can happen in any market. It’s just the key is just to keep going.

Rob:
Yeah, it feels like in general the crowd is always a little delayed. If you’re following the flock, the flock is usually following the front runner. So it makes sense that you probably don’t want to be with the crowd, but I do think it’s not the worst idea to stay a little cautious right now. I’m not waiting things out per se. I’m trying to get better deals, a little bit more scrutinizing the types of deals I was taking on two years ago. But with all that said, Avery, I mean we talked about the competition side of it. Do you think it’s a competitive, I know overall we said competition is low, but for investors, do you feel like the competition has leveled out? Because the way I’ve experienced this is people who are really serious about real estate and have been seasoned veteran investors didn’t really slow down too much over the last year.

Avery:
Yeah, I’d agree with that. The ones who are seasoned and understand what they need out of a deal and that it’s not their first one, I think are definitely have been keeping a more steady pace over the last year than some other ones. I mean, I know myself, we’ve bought significantly fewer deals this year than in previous years, and it’s not because what’s out there doesn’t make sense, it’s ’cause there’s nothing out there. There’s 10 deals on the market, in the market that we buy in and nothing has hit the market in two months. And I’m checking every day and waiting for something to come on that fits our buy box, and it’s just that there’s so little inventory coming on. So I think that the experienced investors are keeping going, but again, it’s still an inventory issue at this point.

David:
What do you guys think about springtime? Do you think that you’re going to see more houses hitting the market? Do you think you’re going to see more buyers coming back in?

Caeli:
I think naturally spring is where we start to see things pick up high rate, low rate, whatever particular lending environments. I think spring is always going to be where things start to catch a little bit of steam. Avery, wouldn’t you agree?

Avery:
I agree. March is always one of our biggest months. So March is typically the month where we see the most closings, and that’s every year. Every year spring is a great time to sell because things pick back up after the holidays like we talked about earlier. So I think we have a little bit of a unique situation and a perfect storm coming into this spring in that we’ve had very, very, very negative rhetoric in the media about interest rates and the economy and the Fed. I’m so tired of hearing the Fed, as I’m sure everyone is. And just now,, right before the spring listing season starts, we get the first kind of good news that we’ve had in a while, the first dovish meeting from Jerome Powell.
It’s, I think, going to accelerate that typical cyclical thing where we see a lot more houses come on the market in the springtime, so I think that, plus positive rhetoric in the media, which again I think is sometimes more important for just the psychology of the masses than what the actual rates are. Plus as those people start to list because of this psychology going on and the actual rates being lower, I think that we’re going to have a bigger spring than what we’re usually used to seeing.

David:
Yeah, I can see that happening. I think as odd as this sounds for every year that I’ve been in real estate, and you notice it more when you’re an agent, people always underestimate how powerful the seasonal changes are. It’s always like, oh, the market’s so slow, I don’t know how we’re going to get by. And then springtime hits and escrows go through the roof and there’s so much demand and all this product hits the market and it gets snatched up and it turns into a feeding frenzy and people go, “Oh my God, the market’s back.” As if we can’t expect that to happen. I feel like it’s always more significant than we expect it to be, even though we know this is going to be the case.

Rob:
All right. We expect to see a surge of supply and demand in the spring, but what are we going to see with mortgage rates and prices? What guidance are these experts giving their clients? We’ll hear from Caeli and Avery on all of that after a quick break.

David:
Caeli, what do you expect to see for mortgage rates in 2024? Do you think that investors should be holding out, waiting for rates to drop to jump in, or do you think that rates are going to stay steady?

Caeli:
I think that depending on the individual investment, there may be reasons to pause, but 9.9 times out of 10, no. I think that loan size is going to dictate the final answer to that. But as I keep repeating, the difference in payment between 6.75 today and 6.5 or 6.25 and six months or eight months or 10 months, whatever, is negligible and it should not preclude someone from taking advantage of the opportunity today and the inventory today and all the other benefits that the asset’s going to produce.
So no. In terms of where rates are going to go, I am like-kind in the opinion that I think that they’re on the run. They will come down slower than we see them go up as just historically what happens to interest rates. But guys, rates are fluid, rates are not a straight line. They’re going to go up, they’re going to come down and I really try to do my work and job to educate investors that you need the rate to work the deal, but stop fixating on the rate. The rate is not as relevant as so many other variables of vetting the transaction.

David:
So let me run a hypothetical situation by you two. Let’s say that springtime comes and rates come down at the same time. That is going to make investors feel much better about buying. Most people that are listening to this or waiting for some scenario like that before they jump in, what can we expect to see prices do if that does happen?

Avery:
I think in the short term they are going to go up. As things even out once we get more of an equilibrium with inventory in the market, I think that that will even out too. But I think in the short term, I’m not sure how long, I mean, by the short term, but I think they will go up at least for a while.

Caeli:
And in the meantime, I would just offer as an extra to that, whether it’s now and they’re taking advantage of whatever opportunities are available to them today versus in March or later in the year, they need to be ready, they need to be prepared. And if they just make a decision in March, “Oh, I’m going to get in now,” and they’re not ready, they don’t have their capital ready, their credit is maybe there’s some X, Y or Z that needs to be looked at or fixed, whatever it may be. If they’re not prepared, then they will, they’re going to be trailing, especially if we all agree that March is going to be bigger than I think the last year’s March in particular is because the deeper psychology from March of ’23 versus what I think we’re going to get in ’24 because of the new language about rates. So if you’re not ready, you’re going to be at a huge disadvantage.

David:
So we all agree that there is a potential that kind of the stalemate that we’re in right now that higher than previous rates and lack of inventory has created this pressure where there is significant demand, but there’s also low supply, and rates are staying steady, but it doesn’t feel like it’s because of lack of interest. It feels like there’s very difficult market forces that are pushing together. With that in mind, how are you advising clients to buy? The people that are buying right now, should they be thinking of having multiple exit strategies? Are there certain areas that you feel like are primed to explode or going to be better positioned for investors to be in than others right now, Avery?

Avery:
So again, I think that’s dependent on what the individual investor is looking at. We keep telling our clients like, “Hey, offer low. Just come in low, come in where you think it makes sense and let’s see what kind of a deal we can get you here on the purchase price.” But I want to be careful before I say this next thing ’cause I know a lot of agents have been saying all year, “Marry the house, date the rate,” and I hate that. I think that encourages people to invest irresponsibly.
So I think what people need to do in order to make sure that they don’t over-leverage themselves in that way is make sure that the numbers work at the interest rate you’re able to get it for now. Let’s beat them up on the price as much as we can. Make sure they work at what you’re able to get now interest rate wise and then later if and when rates come down, which could be next month, it could be 10 years from now, but if and when that happens, then any refinance room that you find to refinance into a lower rate is just extra. So make sure that, that refinance part is extra and not necessary when you’re investing right now.

David:
Do either of you have a market or several markets in mind where you think that we’re likely to see rents go up more than the surrounding areas or values go up faster? What are your thoughts on that?

Caeli:
I will just offer that for rents going up. I don’t know that, I think, Avery, you can handle that, but in terms of home prices, et cetera, generally speaking, historically speaking, the sun belt states are going to offer. There’s exceptions to every rule. But the higher the appreciation, the lower the cash flow, higher the cash flow, the lower the appreciation on let’s say a single-family, long-term rental. So for appreciation, typically those sun belt states are typically where you’re going to find the price points increasing at a greater clip than in Indiana, for example, or certain markets in Indiana.
On the rents, Avery, you probably have that better than I do in terms of specific markets where we see rents really on the rise. Actually, let me say one thing, there is a website that might be useful. I don’t know if you guys want to keep this in here, FHFA, Federal Housing Finance Agency. It’s a government website. Obviously, it’s free. But I mean they put a lot of money into it and you can go in there and look at the different data and metric. They’ll go pass, present, and even futuristically where it’s not rents, but it will be appreciation in markets for housing. You’ll be able to get that data.

Avery:
Yeah, I think for the rents rising, I don’t think any are necessarily about to explode, but same answer as the past few years. I think Southeastern states really are, especially the areas where the medium-ish metro areas like Charlotte for example, where a lot of people from California, New York are moving into those smaller metro areas in Southeastern states. I think those are areas where it’s looking pretty good to me.

David:
Okay, so if you had someone listening, they’ve got some capital, they’re ready to rock, but they don’t have to rock. Are we in general advising people to buy now and try to avoid some of the competition coming in spring or are you on the side of, “Well, wait to buy and see what rates do”?

Avery:
So I never necessarily tell people to wait to buy because we just don’t know what’s going to go on and what six months from now looks like. And I know when I first started investing, I had to save up my first $25,000 to buy my first long-term rental. And over the course of time, it took me like a year, my husband and I, a year to save that up. Our original target price was a hundred thousand dollars house. That same house was $140,000 by the time we saved up for it.
I would recommend buying what you can find that makes sense now just because it is such an unknown, especially now in the future. If you can find something that makes sense now, I think go ahead and buy it. I mean I know there’s one market that I’ve been trying to buy in for the past probably three or four months. And when I saw that interest rate drop the past couple weeks, I remember to myself, I thought, “Oh, man, texture agent before everybody else jumps in.” So I felt like, “Oh, my god, I got to do this before everybody comes back.” So it definitely, it affects me too.

Rob:
Yeah, I was wondering the same question because it is an interesting dance where things start to pick up in January, but the competition is lower in January in theory than in March where everything is going in. So it seems like what you’re saying is basically like, “If you find a good deal, jump on it because we don’t know the level of good deals that we’ll have in a quarter or two quarters or for the rest of the year,” right?

Avery:
Yeah, that’s how I feel. And then I also have this level of not saying, “Oh, yeah, you need to buy now,” ’cause everybody is like, “Well, she’s a real estate agent. Of course, she’s going to tell you to buy now.” But that’s how I feel is, that we don’t know what’s going to happen, especially in the near term. Things have been really volatile the past couple of years, so if you can find a good deal now you need to jump on it.

David:
That is the joy of being an agent. That is absolutely right. When you don’t tell somebody that they should push forward and prices go up, they’re mad at you. I’ve literally had people say, “I said I didn’t want the house, but why didn’t you change my mind?” My own brother has said that. “Why didn’t you push me harder to write a higher offer on that house? I definitely should have bought it. I lost it by $7,000.” And then obviously if you tell people, “I think you should buy the house,” and the market goes down, everyone’s going to be mad at you. It is very difficult when you’re judging your portfolio by how it does in the near term, which is why we try to tell people you should be putting a strategy together to build it over the long term.
And what’s funny is 20 years down the road, no one even remembers what their real estate agent said or what was going on at the time of that one specific deal. But I’ve yet to meet the investor who says, “The house that I bought 30 years ago is a mistake.” In fact, what they always say is, “I wish that I would’ve bought more.” So the trick is how do you survive for 30 years in this market? So for people that are looking to buy in the near term, they know that they want to get in the game. Do you have any advice for that person of what they should be cautious of and what they should be looking for? I’ll start with you, Caeli.

Caeli:
I would say, again, be prepared, right? Get prepared, start talking to your support team, get your finances in order, et cetera. And it’s going to be a matter of individually, and we look at it very individually where they are right now, where do they want to be in a year, where do they want to be in five years. So it is very individual, I think, the answer to that question. But I agree with the last sentiments in that now is the time. Rarely will I tell someone to wait on interest rates. There’s too many variables that none of us can predict for. And we haven’t even talked about what could be changing in their own individual lives that could preclude them or make it more advantageous. That would be my advice is be prepared and take advantage when you can.

Rob:
What about you, Avery?

Avery:
I definitely agree with Caeli. You definitely want to be prepared. Make sure you have all your financing in order. And definitely when you’re looking at deals, especially if you’re looking at on MLS deals, just sort by days on market, because I’ve seen this even with my sellers, where I’m the listing agent, where people will make low offers and make low offers and they say no a hundred times. And then one person comes along, makes the same low offer everybody else has made on the hundred first try, they’re finally fed up with it and they sell it to them. So high days on market is a really great thing to start with, if you’re looking to really try and get a deal in this market.
It doesn’t always work. Some people are just overpriced and they’re stuck on their price and that’s what it is. But if you make enough offers, you will find that person that finally says, “Okay, fine. Let’s just get rid of this.” Don’t hesitate to offer low on things. Just make the offer that makes sense for you. Start with high days on market. And also, terrible listing photos are a favorite way of mine to find good deals.

Rob:
Okay. With the sentiment of like, “Hey, just make a low offer,” is it working? Are people taking lower offers?

Avery:
Yeah, it’s happening. I mean, it’s not happening every time. I don’t want to set unrealistic expectations, but we’re definitely seeing some deals happen. So if you just keep in the game, eventually you will get one. So it is working.

Rob:
Someone at BP con accosted me and was like, “Rob, have a solo high. I had a listing that you lowballed by $200,000.” And I was like, “Oh, sorry, it only penciled out at that price.” And then she was like, “If it was $10,000 more, we would’ve taken it.” And I was like, “That doesn’t sound like I lowballed you that much then if you were close.”

Avery:
And why didn’t you counter me?

David:
Yeah, exactly.

Rob:
Yeah. It was a little bit of an awkward confrontation at the buffet, but it does feel like it is more plausible these days than it was two years ago. So there’s a little bit of encouragement there. You can come in a little lower and at least you’ll be heard. That’s what it sounds like to me.

David:
There was a time where just getting an inspection contingency in your deal felt like a huge win. So let’s not forget it wasn’t that long ago where you were just going in blind and hoping that things worked out, competing against 15 other people. That yes, it is harder to get casual than it was, but you’re getting longer to make those decisions, you’re getting to investigate the property much more thoroughly than you were before. There’s always something when it comes to real estate investing to focus on that can be problematic, but there’s also benefits to every single market. So let’s not throw out the good while trying to avoid the bad. Ladies, thank you so much for joining us here. If you would like to get in touch with either Avery or Caeli, their information will be in the show notes along with Rob’s and mine’s.
Let us know what you thought of today’s show. And if you’ve got a second, please take a minute to leave us a five star review wherever you listen to your podcast. Those help us out a ton. I’ll let everybody go. It’s been great having you all here, and thank you for sharing your knowledge, your heart and the information. All right, it is time for our Seeing Green segment, where Rob and I take current questions from you, our listeners and hash them out on a mic, so you get the confidence and clarity that you need to move forward building your own portfolio.

Rob:
Today’s question comes from Steve, who is already feeling the heat of buying season.

David:
Steve writes, “I am a new investor trying to purchase a property out of state. The area I am focusing on has a very small supply of property, so the landscape is very competitive and I’m outbid on every offer even if I go way above the asking price. I like working with my real estate agent, but do you think I’m at a competitive disadvantage compared to investors who work directly with a property owner or a seller’s agent? This leads to my second question. What can I do to stand out from the crowd besides paying in cash or throwing too much money with every offer I write?”

Rob:
Okay, so Steve really broke it down for us. Can working with your own agent be a disadvantage? And how can you get your offer accepted besides more money?

David:
Okay, let’s get into this. The first approach here would be, if you’re buying in a competitive market where there’s going to be several offers on every property, there’s probably not a secret formula that you can use. You tend to get the best deals when you’re not competing with other buyers. I’ll say that again. When you’re buying real estate, if there’s only one person trying to buy it, namely, you are competing with the seller and negotiating against them. The minute you try to buy a property that has other interested buyers and there’s other offers, you are no longer competing with the seller, you are competing with the other buyers. So there is nothing that you can do when you’re trying to buy into the best markets where everybody else is trying to buy other than write the best offer possible.

Rob:
I think that makes sense. I was going to ask, I mean, is it advantageous to go directly to the listing agent like he’s asking and saying, “Hey, we represent me as well.” I personally think that would give you more leverage, but I think it’s always best to have your own realtor because at the end of the day, I mean the listing agent, they represent the seller first and foremost. I always think it’s hard to get any information from the listing agent when I’m working with them. Has that been true in your experience?

David:
Yeah, and I’ve been on both sides of this. I’ve been the listing agent that as people come directly to me and I’ve been the buyer’s agent that’s trying to buy the property for my client, representing them. When I’m the listing agent and someone comes to me and says, “Hey, I want to write an offer through you directly, what kind of a discount can I get?” I always say nothing. But I might say, “Hey, rather than going a hundred grand over and not knowing if you’re going to hit, if you come in here, I will tell my client that this is the offer that should be taken ’cause it’s literally the best offer.”
So one of the benefits that you can get is if you’re like, “I don’t know if I need to go 50 grand over, a 100 grand over, a 150 grand over,” going directly to the listing agent, they may say, “Well, here’s where the other offers are.” You got to be higher than those because that still fulfills the fiduciary duty to the seller. They are getting the seller the most money possible. They’re just not getting you, as the buyer, the best deal possible. If you want the best deal possible for you as the buyer, you’re going to want to ride a lower offer, but then you might not get the deal at all. So my advice to people is if you’re in a multiple offer situation, just accept you’re not going to get a great deal.

Rob:
No, the logic makes sense. Also, the leverage that you have going to the listing agent is that they make more money, they’ll make a bigger commission. So there’s a little bit of motivation to make it a win-win for everybody. Is that true?

David:
Most of them are just trying to make their seller happy. Most agents are just, “Whatever it takes to make my seller happy, that’s what I’m going to do.” So they’re going to present your offer that came directly to them, and they’re getting paid on both sides, and they’re going to present the offer of the other people, and the seller is just going to say, “Which one makes me more money? Which one’s most likely to close?” Now, what usually happens is the seller says, “If I go with the one that came to you, you don’t get paid that commission. The commission comes back to me.” That’s almost always how it goes down. The seller says, “Well, I’m not going to pay you the buyer’s agent commission if you’re representing both sides. So you have to credit it back to me.” And now your offer isn’t better than the other ones.
The agent isn’t going to be making more money because they had to credit the money to the seller to make that the sweeter deal. And now the listing agent usually goes, “Yeah, it’s not really worth it. Just take one of the other ones ’cause I don’t want the additional risk.” In my experiences, an agent I haven’t seen going directly to the listing agent work when there are multiple offers. I have seen it work when there’s nothing on the table. There’s nothing coming in, and you go directly to that listing agent and you say, “Hey, here’s my offer. Present this to the seller,” and they’re getting paid twice, then they’re more likely to present your low ball offer in a very positive light to the seller. They’re not going to say, “Yeah, this guy’s lowballing us. We should kick rocks.” You just don’t have that advantage when there’s other buyers and other offers on the table.

Rob:
I think there’s a little bit more of 4D chess you can play when you have your own realtor that’s going up to bat for you, right? So if you don’t have this realtor yet, always remember you can go to biggerpockets.com/agentfinder to look up an investor-friendly agent that can go up to bat for you. So let’s get back to Steve’s question here. How can your offer get accepted besides more money? And honestly, I just think with the current climate and the amount of options that are available, the answer is relatively simple, just keep making more offers. I wouldn’t overpay for a house just because you really want to get into this specific market. We have your price point settled. We know that you’re for a certain amount.
I might consider just making more offers or finding more properties where there might be a little bit more pain from the seller. So that might mean filtering out on Zillow 90 days, 180 days and seeing what’s been sitting on the market a little bit longer and going for some of those where you have less competition clearly based on the fact that they’ve been on the market so long. How do you feel about that?

David:
I think it’s good. And I also think that in the best markets, you just don’t find houses with high days on market ’cause there’s not a lot of product, and so they just sell. There’s nothing wrong with continuing to take action, looking at properties, writing offers, and just not getting one in contract and just sticking with it. At a certain point, markets do change, more inventory will come on the market. It will work. Sometimes you just get ants in your pants and you really want to get something because you’re tired of putting all the work in and not getting the result.
But to us, success is doing the work. It’s not necessarily getting a whole bunch of houses in contract at prices that you don’t like. So take a little bit of pressure off of yourself, Steve. If you’re writing offers that aren’t working, knowing that you writing them at the right prices is free. All right. If you’d like to have your question answered on Seeing Green, and we’d love to have it, please head over to biggerpockets.com/david, where you can submit your question and hopefully have it answered on the BiggerPockets Podcast. Rob, thanks for joining me today, both with Seeing Green and with our show. This is David Green for Rob “Won’t steal you girl, but might steal your house” Abasolo, signing off.

 

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