Price cuts Everywhere, Cash in on Cash Offers, Buy a Property with No Income! And of course - RATES!
Tuesday Tips for Realtors: 05/20/2025
Watch the article here: (◉‿◉)🔭
Top Story:
Price cuts → it’s going around!
In the last few months, I have expressed how seller contributions and price cuts have been on the rise. In March, it was reported that over 40% of properties on the market had some seller concession made on their listing.
Well, it hasn’t gone away; some may argue these incentives are actually picking up speed. The big article recently is Newsweek coming at Texas Housing Market.
Does this mean the market is crashing? - NOPE!
Does this mean you panic? - NOPE
What does it mean?
There are a few schools of thought, but primarily, it means that Sellers are no longer in the driver's seat. The playing field has leveled out. Inventory is up, so to attract buyers, you need to either have a home that is undeniably in demand (location/upgrades/amenities) or have it priced accordingly. Either the price tag or incentives for the buying party stand out from the competition.
When you pull up Zillow, it's clear that these incentives are not going anywhere, which is a good thing.
It creates market competition. The initial impact isn’t fun since everyone wants the market to be “easy”. A market with competition creates motivation and separates the clients from those who are ready from those who continue to sit on the sidelines. If you are serious about this industry, a competitive market is where you want to be. This is where the pre-COVID agents will shine, so if you are a newer agent, it’s not a bad idea to pair up and absorb as much knowledge as possible from the experienced agents out there in the marketplace. Professional agents, this could be a great time to start expanding your team with young talent that you can help mentor and lead through the current market conditions. It isn’t about being greedy, it’s about being strategic and passing on to the next generation of agents.
As always, if you need any assistance with seller concessions, how they work, or how to maximize them with clients’ loan options, do not hesitate to let me know!
If you need to keep a Seller Concession reference on your desktop, feel free to snag the chart in the Seal the Deal Article from April!
Top Growth Listing Tip:
How to cash in on cash offers!
Last week, I had the Opportunity to attend LeverageCon here in Dallas. In the Fix and Flip panel discussion, the panel made a quick but interesting comment about how experienced, driven investors are making offers on properties where the sellers win after the project is over.
Now, this is outside my expertise from a “how-to” perspective, but it was a fascinating concept that I wanted to share. As a lender, this deal wouldn’t hit my desk, but as agents, you should be aware of and educate yourself on it.
Now, most sellers do not want to dump their house at a "steep discount" to an investor. However, how many of them would be more open to the idea if they found out they could get a payout from the profits after the project is finished?
So why do sellers typically consider cash offers? Mostly due to time constraints caused by one or more of the following situations.
Money Troubles: Maybe they're about to lose the place to foreclosure, or they just need cash right now for something serious. They're underwater, or have huge bills.
House is a Disaster: The property might be a total mess. We're talking major repairs needed, stuff they can't afford or even figure out how to do. Selling it “as is” would be a headache than what it is worth to the seller.
Life Just Happens: Think sudden job relocation, a tough divorce, or inheriting a headache-causing house. They need out, fast.
No Fuss, No Muss: They just don't want to deal with contractors, showings, or the stress of a traditional sale. They want to wash their hands of it, but still get some upside.
"FOMO" on the Flip: They know the house could be worth a lot more fixed up, but they can't do it. This way, they get some of that profit they'd otherwise miss out on.
Basically, they're giving up a chunk of money upfront to speed up the process and avoid a massive headache, but what if you could counter back to the investor and have your seller share in the investor's profits?
Now, remember this is just a trend the private equity space is seeing with property investors. If you ever pitch this idea to a seller, it’s 100% your idea. So do your research; this isn’t financial advice, so be certain you know who your investor is. And it wouldn’t be a bad idea to get legal professionals involved to proofread the legal documents. I know a few if you need one!
How This "Hybrid Flip" Actually Works
This isn't your grandma's real estate deal. The key here is a super-tight, legally-binding Joint Venture Agreement (JVA). Think of it like a business partnership, but the house itself is already sold.
The Sale Happens First: The investor (or their LLC) buys the house straight up from the owner. It's a regular cash sale, just at a big discount. The original owner is out of the property's title. They're no longer the owner; they're now a partner in a future profit split.
The JVA Kicks In: This is where the magic happens. This agreement spells out everything:
What "Profit" Means: It has to be crystal clear! It's not just the sale price minus the discount. It's the sale price minus everything: what the investor paid, all the renovation costs, taxes, insurance, utility bills during the flip, selling fees, even a fee for the investor's time.
The Cut: How much of that net profit (after all expenses) does the original seller get? It could be 10%, 20%, or even a set dollar amount if the profit hits a certain number. To an investor, even giving away 50% of the profits is better than a goose egg; they would see not being able to acquire a property with mega potential.
The Plan: It lays out the rough timeline for the flip, design, and estimated costs and sales price. It’s best to make sure everyone is on the same page.
Keeping it Real: Be sure the property comps out based on the investor's plans for it. Consider the trend of price cuts for similar homes, and make sure everyone agrees on the numbers involved and the timeline of the flipped sale. Who knows, maybe you can sell the same house AGAIN!
Sorting Out Fights: What happens if they don't agree on something?
Once the property is sold, the old owner has zero claim on the house itself. Their only claim is a contractual one through that JVA. This protects the investor because they own the house outright and can do whatever they need to without the old owner getting in the way.
Why This is Getting Traction
This isn’t a brand new concept, but these Wall Street-type business deals are hitting Main Street since this type of business deal can be done by ANYONE, not just savvy people. Home prices are high, but investment potential is present in many properties. Sellers want to sell but don’t want to give away the bank. In a tight timeline situation, this solution is much more palatable and profitable for everyone involved vs. selling wholesale. This way, the investor puts in the money and work, and the seller gets their fast cash plus a shot at some upside they couldn't get on their own.
It's a pretty clever way to get those distressed properties moving and can be a win-win for everyone involved in this crazy market.
Top Lending Tip:
Buy a property with no income!
For the record, I have products that are no-income document loans for all occupancy types (including primary purchase). However, for the topic at hand, I will stick with how to buy an investment property without documenting your income. These loans are non-traditional loans, so while rates may be a little higher (see below), they can close much faster and with fewer headaches compared to a Fannie/Freddie Investment purchase.
So, debt service coverage ratio (DSCR) loans are the key to buying investment properties and not having to document your day job! These loans are designed to help new and existing property investors qualify for long term loan solutions solely based on the rental market in the area.
There are several spin-off scenarios on when you could use a lending product like this, but here are the two common scenarios:
Client wants to buy a turn-key, investment property; however, they either:
Cannot afford to qualify traditionally with the payment (debt-to-income is too high for whatever reason).
OR
They do not want to qualify for a loan in their name; they want to close in the name of a business (for legal and tax reasons).
If a client in this situation has money to put down and money in the bank as reserves, there is a good chance the client can qualify without showing any personal or business income. All they (or the property, really) would need to support is a sufficient rental income for the immediate future.
An appraisal or market analysis would be done on the property to consider the market rent for a home in that area. This figure could be compared to the active rent received on the property. Typically, the lower figure wins, so if the actual rent is higher than the market, they would qualify for the loan using the ratio based on the market rent. Then, the lender would look at that amount in relation to the proposed mortgage payment on the loan requests. (Also, consider the client's financial strength.
The math behind this is the Debt Service Coverage Ratio. Or another way to think about it is:
Mortgage Payment (debt) IN RELATION TO Rent Received (in service) = Coverage Ratio
You would think it’s Payment / Rents, but the ratio formula is really Rents/ Payment
Example: $2,500 Rent Recieved / $2,000 Mortgage Payment = 1.25 or 125%
Rent is 25% more than the debt payment
When you run the numbers, it is easy to remember what’s better:
If the ratio is over 100%, you are looking good; the rent will cover the proposed payment and then some.
If you are under 100%, the rent received is insufficient to cover the proposed payment, so the investor is in deficit.
Just because a payment is running a deficit doesn’t mean it cannot qualify. Several lenders have a requirement of 1.01 or higher. However, there are many loan options for a NO RATIO DSCR, meaning the lender will approve no matter what the ratio is.
Crazy right?
Just remember, these loans originate from lenders who use private equity and money to lend on properties. While they prefer to lend to people who will pay them back, the lender also looks at the property from the perspective of whether, if they have to foreclose, the property has the potential to perform. If it doesn’t, your client isn’t getting the loan. If the property does have the potential, and so does your client, the loan is almost a guarantee.
So, what clients are best for these types of loans?
First-time or experienced investors
Housing history (own a current primary) is typically required, but not always.
Average Mid-600 Fico + (typically slightly higher for first-time investors)
Average 20% down payment + Closing Costs if needed (plus reserves, 3-9 months)
Clean criminal history (typically the last 10 years) - Fannie/Freddie do not care but Private Equity does!
A business established to close is not required, but it is more common to find competitive lenders who only close in a business name than in an individual's name.
This is mainly due to validating the use as an investment—owner-occupied homes are much harder to foreclose on than business-purpose/investment homes. There is also less risk and red tape for the lender when lending to a business.
Lastly, these loans can be made individually or as a package, like a portfolio. Investors like to sell and buy in bundles; it's like a discount, but remember that there could be individual property values and income requirements required by the lender.
If you have any other questions about how this loan type works or how you can use it to grow your business, email me and let me know how I can help!
Quick Rate Reference guide for 5/20/2025: ⬇️
The following rates are for visuals to help you see where rates are. These are never final and are intended to be a more realistic look than what you find advertised on popular sites. All rates are subject to client scenarios and are subject to change. Thank you for using common sense when reviewing! 😊
Overview:
Rates are steady → APRs decreased a little.
Ideally, interest rate costs have come down slightly, not dramatically, but that is a good sign when the cost of a rate goes down.
It will take more time to get things moving. The main factor everyone is watching right now is the job numbers. If unemployment and job report numbers start to turn sour, then the bond market should respond positively, which will positively impact mortgage rates.
The recent US Credit Downgrade shook markets a bit - but things are stabilizing this week.
What should you say to clients who are waiting for lower rates?
Nothing has changed here—if a client is comfortable with a payment, lock it in and get it done. Real estate is not about “shoulda, woulda, coulda”
—just do it!
