A sellers dream -- competitive bidding on their home -- is a buyer's nightmare. As a purchaser, how do you know how much to offer so you win a property without paying too much? What factors othan than more money at the terms table can make you more attractive to a seller?
Despite what many buyer’s think, there is still competition on some of the properties out there. Any way you look at it, being educated, prepared, and informed, are characteristics you must have always in your back pocket.
An Undeniable Reality
In many areas of the country such as the Northeast and Washington, D.C., California and other desirable real-estate markets, competing against multiple buyers -- an overbid situation -- is still a reality. Learning what to offer is part science, part intuition. When a competing for a property this can be the only way to succeed.
Here are some tips that have worked in our pheonomenal Seller’s market and can still be applied to the properties selling now.
Be informed. Know about sales prices of homes in your desired area. Also know what you can afford to buy without overextending yourself and what kind of loan is available to you. Create a budget incorporating your new loan amount in comparison to your current expenses. Foreclosure, which is slowing our market now, was because of hasty buyers, being overly emotional and not knowing the reality of their financial situation.
Research recent sales prices on comparable homes. The asking price isn't always the best price to offer. A better gauge is the comparables, or "comps," or the recent final sales prices on similar homes near your target property. If other homes like the one you want sold for $50,000 over the asking price, "you want to bid to that highest dollar amount. I will provide you with the most appropriate comps for the area you are considering. Remember, comps are not always apples to apples, an experienced realtor knows how to evaluate properly.
Research the sellers . Determine how motivated the sellers are, and whether they are attached another property. In this case, you might be able to make your bid more attractive by offering such concessions in your bid as allowing them to stay in your home for free -- also known as a "free rent-back" -- after the sale. Knowing whether a property is being sold to settle a will is also important, because these sales are mostly driven by how much money they can generate.
Factor in the number of other buyers making offers. The more bids being made, the higher the final price will go. Typically, competitive bidding raises prices by 5% to 20%, with 10 or more offers generating the highest amounts.
Write a letter to the seller . Don't discount the emotional factor. One way to set yourself apart is to write what a letter to the seller describing yourself and/or your family, and why you want the house. There have been instances when competing for a property this has been the “Tipping Point,” for several of my buyers when competing for a property was a consistent fact of life.
Bid an odd-numbered amount. Most buyers typically offer a round number, such as $500,000 or $505,000 on a home selling for $495,000. Try to determine the highest amount you believe other bidders will offer. Then if you bid an uneven amount that's slightly higher, say $507,250, you may outbid the highest round-numbered offer and win the property.
Believer it or not, this little extra amount, can be “The Tipping Point,” to the hightest bid since everyone else is probably thinking of a round number too.
Make your offer as clean as possible. Try to remove every factor in your offer that might deter a seller. Include the highest cash escrow and down payments you can afford and as much as possible of the remaining payment in cash. If you need financing, secure a letter from your lender stating that you have been approved for the loan. Eliminate as many contingencies as possible; offer to have the property inspected quickly and to pay local closing costs, such as special taxes; and be ready to close as soon as possible. Don't ask for any appliances or fixtures that the owner wants and be sure to offer special assistance the owner might need, such as a free rent-back clause.
If the seller likes the buyer, price, financing or narrow contingencies, those people will have a chance to come back to the table.
Decide how much you really want the property. This is the critical issue in a multiple-bid situation. If you really want the home, you should make your strongest offer, because you may not have a chance to make a counteroffer later on. If the house meets all your criteria and this is where you are planning to stay, paying another $5,000 to $10,000 over 30 years is not going to change your life. However the time it will take to find a comparable property can. At least for a little while anyway.
Another rmistake many buyer’s are making is “buying in” to this “Buyer’s Market Mentality.” The bottom line is, if it is the property you have been in search of, in the area you want, with the attributes you hoped for, then it is the property for you, and it may not be so easy to find another one just like it.
The bottom line is the most attractive properties are probably the most attractive to others and will most likely remain situated for competition, even today. Be ready.
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