How To Avoid Paying Too Much in a Bidding War on a Property

[Corey Dutton]

Nearly every real estate investor that has come to me lately for a hard money loan on a property in California is paying over the asking price. Why? There are bidding wars going on in California right now with a glutton of buyers bidding up the prices of real estate over the asking prices. But how do you prevent yourself from overpaying on a property in a bidding war? Here are 3 tips that a real estate investor shared with me to avoid paying too much:

1. Determine Your Max Offer Price and Stick with it: Despite the buying frenzy around a property and the pressure from real estate agents to bid over asking price, decide what your max offer price will be and stick with it. Many times agents will encourage their buyers to offer way over the asking price in order to win the bidding war. Don’t succumb to the pressure.
2. Keep Your Comparables in Hand: A real estate agent will provide you with comparables but do your own homework. How far away from your property are the comps? Are they similar properties with an equal number of bedrooms, bathrooms, square footage, and upgrades? A finished basement or a detached garage are examples of things that can throw off the comps, so ask the hard questions and make sure your comps are accurate. Don’t allow incorrect comps to make you overpay for a property.
3. Determine the Repairs Before You Bid: Get inside the property and make a punch list of repair items and upgrades that will be needed. What will be the cost and does the deal make sense once you factor these in? Many times buyers will get worked up about a property because it appears to comp out as a “flippers dream.” Later to find out, once they have an accepted offer, the property isn’t even worth the asking price.

These are just 3 tips that a real estate investor shared with me. How do you avoid overpaying for a property in a bidding war?

Posted by Corey Curwick on October 30, 2012 from Private Money Utah

[Glenn Espinosa]

Awesome tips. With the influx of novice flippers coming into the market (I consider myself one also even though I have 2 under my belt btw) there sure are a lot of properties around my way going for 10k, 15k even 20k more than I would have ever paid for. The product of these bidding wars are often very poor rehabs and inflated ARVs. I've seen numerous flips that have sat in the market for way to long because novice flippers are pricing themselves 30-50k over what the market is dictating.

This makes getting into a property so much harder though. Do you guys see a slow down in the flipping craze anytime soon, and does anyone have any strategy in combating this influx of new flippers? Or is it simply a numbers and waiting game?