Help! I keep getting outbidding. What am I doing wrong?

Question

I found 3 duplexes in the last 2 weeks that I really liked. The cashflows were perfect. I put offers in and I got outbidded on all 3.  What strategies do you use to minimize the risk of being outbidded?

Jay Hinrichs · Answer

!.  all cash

2. larger than traditional EM

3. as is no inspections.. just look at it when your making an offer and know what your looking at..

4. be realistic.. on what kind of returns are happening in the market place you may be unrealistic..

5. go find them off makret do your own direct mail or drive for dollars type gorrilla marketing if saving 5 to 10k is that important.

Melissa Kirchhoff · Answer

@Ashley Hughes - I'll give you what I give my buyers I work with (as well as things I've used and other investors and agents have used to win multiple offer situations in the past) of course, they may not all apply or be right for you, but I think it's good to know you have the options!

First, get in there first. In situations where things are flying or if a property I know is going to be hot, I literally stop projects I'm working on to look at it. I do the same for buyers in your situation. If I can't, (like vacation or something) I pay another agent to show it for me or do a split.

Regarding offer:

1. Obviously, price. Know your numbers and if the numbers work and you think/know it will be in a MO situation, make a strong offer from the beginning. It will show the sellers you aren't playing around.

2. Financing - this I know isn't really in your control, but cash usually wins and from there it would go conventional, government. If you can move up in one, do so! But again, usually this is sort of it is what it is type situation.

3. Close date. Again, if you're financing, you're restricted slightly on this. Try to get every document your lender can possibly use to them before the offer and be as ready as possible. Ask them if they can do less time if it means winning an offer. Some will say 45 days to be comfortable but with government they may need it. Also, if you're still shopping around on lending, this is a good question to ask!

4. Other contingencies:

- Ernest money - Honestly, to me, as an agent, EM is completely stupid. I won't get on that tangent though. For sellers though, it's the fuel that makes their world turn. Putting more EM down (don't go crazy, but do more than average for your market) makes your offer look much stronger and you're still protected by clauses and the contract to get your EM back (but remember, the seller does have to sign to agree so it can tie your money up for a while!)

- Attorney review - this is something I've crossed out on offers personally. Again, this is something you have to feel comfortable with (and this one isn't really huge to most sellers unless they've had someone tie up a property just to give them more time to think or something)

- Inspection - Same thing, I've had contractors and people through with me and give me a general idea. If I know I'm going to buy the house anyway, then it doesn't really matter to have the contingency on there. Now, if you planned on getting one, don't cross this out! Buying something and finding out there's major roof, foundation, etc issues is not worth winning the bid! But if you have someone that was going to do it anyway or if you knew the inspectors you wanted to use could get in and get you the report back in 3 days instead of 10 business days, use it! Put that on the contract with maybe a few days grace period and if you still have attorney review then that can always be changed (but both parties will have to agree to it).

- As-is - This is another good option if the property isn't being sold as-is already. What it will mean is you can still get the inspection if you want, but you won't request repairs or concessions. It's basically if there's something major discovered in inspection (and found during inspection period) you can just walk away. Again, some sellers are happy to know they won't have to keep throwing money at it.

- Survey - I don't think this is really a thing done everywhere, but around here, it can cost around 350-400 for a normal city lot to be surveyed (greater for more land) and can be pretty expensive for the sellers. If this is something that doesn't matter to you (to have the survey done and the property corners staked) then it's a good thing to eliminate. Around here, our city won't really raise issues with anything that's been existing (I sold a house that literally the entire porch was technically in city property and it's never been an issue) so most buyers and sellers don't care about the survey unless the property lines aren't clear. Don't do this if you've had issues in your area. And beware of asking people with the old wives type tales. Ask people who are in the real estate world. With any of this, I'd talk to some local area investors and get a good agent behind you that can help with these things and advise you of the pros and cons of each.

In some areas, I've heard of writing letters to the sellers, or even giving a acceptance type gift (like for real, other agents have told me in big markets that they will give the seller a non-refundable $25k upfront to accept (even if there's like an inspection issue or something! WTH?! And how do I get in on that? lol)) so there's alternative things to consider (though I would never do the latter one!) and the letter might be more for someone emotionally tied to their house, not a income property, but hey, no real harm in trying!

Also, my quick hippy side has to speak. I tell all my buyers this when they lose out. Believe me, it happened for a reason. I've lost out and I look back and go, wow, better things were in store and I had no idea! I spent time being upset and now laugh at my luck. It sounds stupid, but I believe in it, and any buyers I've had that have lost out in MO situations, it's resulted like this too. One actually lost out on the house next to his parents (and he went way over asking (and cash!) in a market that RARELY every went above list!) he was insanely upset (and this was like his third time losing out, I felt like a failure!) and in the end, he was thrilled that it worked out the way it did. He liked the house he got much better, and he grinned and told me it wasn't so terrible to have a little space away from his parents. lol (it was only like a 5 min drive but I think that was 5 minutes he appreciated!) So have a little faith that things work out for a reason and don't get too bummed out about losing out, I know the feeling! Good luck!

John Thedford · Answer

Raise your offer price

Ed B. · Answer

NOt much you can do when idiots offer too much. Welcome to the world of getting screwed.

Ashley Hughes · Answer

Thank you all for your advice.  I will take your advice and see what sticks.

Lynnette E. · Answer

Maybe give a good offer and add that you will beat any other offer by $1000 up to XX$.

Matt K. · Answer

Get a good agent that knows the listing agent...bonus points if they are the listing agent.

Help! I keep getting outbidding. What am I doing wrong?

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