Bid It To Win It! Strategies for Bidding Wars!

In today's market, there's a huge shortage of properties to bid on and that is creating some pretty serious bidding wars. So you've got to act fast and Bid It to Win It if you see something you like. In other words, Run Don't Walk. Do you have the $$ now or a current pre-approval, but don't know what to bid? Take it from me, there are a lot of factors to carefully consider when making a bidding decision, especially when facing multiple offers.

Foremost is to be sure this is the perfect home for you and your family's needs and that it fits the budget. Don't be caught up so much in winning the bidding that you end up biting more off than you can chew. For Investors, you have to ensure a property is going to cash flow. For both types of property buyers, ask yourself if this is the right location for you? Remember that old adage....Location, Location, Location? First used in the commercial real estate arena, this also pertains to buying a home or investment property. If, after careful consideration and calculation, you answer yes, first find out how long the house or investment property has been on the market. (Remember: this may not be the first time this home was listed during the last year.) How motivated is the Seller? Do you know why the home is being sold and what pressure the Seller may be under to move? Check out the comparables in the neighborhood, or the rental income for investment properties, that have sold most recently as this can provide the most relevant information. Your Realtor can help you analyze the information and recommend a starting point for your offer. Just make sure your Realtor has a lot of experience dealing with multiple offer situations.

If you have found that the property has been on the market for awhile you may find bidding below asking price might fly. If a property is new on the market, or has a lot of interest, this may not work. Please remember, this doesn't necessarily give anyone license to make an extremely lowball bid like half of the list price, for example. This can be deemed as an insult to the seller and could permanently close the door on any further negotiations. If this is the property you really want, don't jinx it by getting greedy. Be reasonable and try to see things from the Seller's perspective while protecting your own budget constraints. You may still get a good deal by bidding appropriately.

So you find out that there are multiple offers on the property. No sweat. If you are seriously interested in this home or investment property, don't be afraid to bid higher than asking price. And if the seller counters, feel free to counter back. But know your limits....meaning know what you can comfortably afford. Be cognizant of your budget and understand your additional transactional and closing costs. In a counter offer, any of the terms can change beside the offer price, such as hand money, settlement date, contingencies and addenda. The counter process could take awhile, but the closer the variance between you and the seller, the more motivated both of you are to meet that happy medium.

Recently, in Pittsburgh PA, I dealt with this very issue. My client was bidding on a lovely, pristine home that I cautioned would probably have multiple offers on it. Sure enough, 4 bids came in the same day. My client didn't believe me when I said our loan situation would require us to bid above asking price (they were asking for Seller assistance, a common method for the Seller to rebate cash credit at closing to help a buyer with their cash situation). My client refused to listen and only bid below asking and included the Seller assistance. So of course, we didn't win. We could have made our offer more attractive by increasing our offer price. We always need to do everything we can (within our limits) to make our offer attractive to the Seller!

Personalize your approach by telling your Realtor why you want this home. (Most often used in residential home buyers, not so much in investment properties but could be). Perhaps it's in your childhood neighborhood and you have a personal tie to it. Maybe it's a good home to start a family. Maybe there's a particular feature about the property you have fallen in love with. All of these things are points that the buyer's agent can convey to the seller's agent. This may influence a seller, especially when there are multiple offers on the table. Many sellers have a personal connections with their home and want to feel it will be loved and well maintained as much as they did.

Also remember when competing with other bids, there are a lot of financial factors presented in each offer, such as seller assistance, type of loan and of course the actual bid itself. An agent will not be privy to the terms of the other offers, so again bid it to win it! With an investment property, while a lot of strategies are similar to home buyers, there are even more that are unique to REI. You've got to ensure cash flow, location and returns among other factors, so bid accordingly. You may also find auction and/or foreclosure properties where you need an expert to submit your bid for you online. So get with someone familiar with this procedure. Also there is no harm in bidding on multiple properties either as long as you are willing and able to have them all accepted.

Ok, so let's talk contingencies. While a seller may like it better if there are no contingencies, some stipulations just make good sense. A home inspection is not required, but strongly encouraged as there may be hidden issues that the seller may or may not be required to fix. But at the very least they can help in the negotiation process. And in some cases, even if you walk away from the deal, the seller may need to add them to the disclosure for future negotiations. Also you may need to be flexible on closing dates. If things go smoothly through the process, you can always offer a "rent back" to those that need more time moving out.

Bottom line: be reasonable and calculative with your approach. I know everyone wants the deal of a lifetime, but a ridiculously low offer will be rejected often with disdain. Granted it's business and even more so with an investment property, but people remember the outlandish and still like to feel a personal connection to serious buyers coming with viable offers. Also don't bite off more than you can chew. Do your due diligence. Trust your Realtor and solicit advice from him or her. And don't be discouraged if you lose the bidding war. There are just some things in life that are out of our control. There are other homes and investment properties out there and your Realtor will help you find them. Things happen for a reason but you will ultimately find your dream home, your business, and your future!