Advice For Buyers Bidding On A Home With Multiple Offers

In case you missed the news, markets are starting to pick up, which means more home buyers are likely to get off the sidelines. But, given the lack of good inventory in many real estate markets, there are more buyers than properties.

The result? Multiple offers are making a comeback.

The days of bidding wars, with several offers over the asking price, are probably gone in most markets. But buyers in certain markets are likely to see competing offers under the listing price.

Here are three strategies for buyers to follow when the home they want has received other offers:

1. Don’t Over-Analyze The Other Offers Or The Listing Agent

After multiple property viewings and interacting with the seller’s agent, the agent tells you there’s another offer on the property. Your reaction: “Really? Are you kidding me?”

Take the listing agent’s word for it, but only use that as one data point. Don’t spend too much energy trying to figure out what’s really going on with the other offers. If you love the property, keep moving forward, but at your own pace. Make the offer you’re comfortable with, and only when you’re comfortable making it. Don’t feel pressured to make an offer in order to compete, especially if you’re not ready to put in a bid.

2. Focus On Your Negotiations With The Seller

Sometimes, the listing agent will say that the other offer is a better price, has a larger down payment or a quicker close. Who cares? The seller will still be looking at and working with your offer when considering their circumstances. For all you know, the other offer may be a horrible “low ball” offer or from a buyer who isn’t pre-approved for a loan or from an out-of-area agent who is unfamiliar with local customs and protocols. Or the buyer may have made the offer after only seeing the property once.

Even though there are other parties making offers, don’t get distracted by them. Stay focused on your own negotiations with the seller. Remember: You’re not negotiating with another buyer, and trying to do that will drive you nuts.

3. Present Yourself And Your Offer In The Best Possible Light

Most people make a decision about whom to sell their home to based not just on price but on the whole package. Who are the buyers and what is their level of interest in the home? What’s the price they’re offering? How many contingencies are they asking for and what are the timeframes of each? What is the down payment amount and length of escrow?

If you love a home and want to make an offer, start by making yourself known to the listing agent or the seller. Visit the property on multiple occasions. Show your face to the listing agent as much as possible. If the property is on lock box, it’s OK to go back at various times of day and in the evening. You’ll get different perspectives on the home, and the sellers will surely notice your interest.

Consider writing a note of introduction to the seller with your offer or ask that your agent do so. Be sure to present a pre-approval letter with your offer, too. This is a no-brainer in demonstrating to the seller that you’re a qualified buyer and you’ve taken the time to get approved for a mortgage.

If you have an inspections contingency, make the timeframe quick. If you really want to make your offer stand out, pre-schedule the inspection for a couple days out, so there isn’t a lag time waiting for an inspection appointment.

Finally, put your best foot forward with your earnest money deposit. While there are customary ways of approaching earnest money deposits in each real estate market, putting up only a few hundred or only a thousand dollars may give the seller the impression you’re not that serious. If you can put up the full 3 percent, do it. It shows you mean business. Don’t forget this money is refundable should something major come up, and your contingencies protect this deposit. For more information, read “3 Ways to Protect Your Escrow Deposit.”

Ultimately, keep in mind that the sellers are probably embarking on a major life change. They may be selling due to a job transfer, new baby, or the need for more (or less) space. It’s a huge decision for them, and receiving an offer can be as exciting as it is nerve-wracking. So lead with your best offer. Be patient and understanding. See what happens. If you don’t get the property, learn from the experience and move on. Who knows? You may find something even better.

Brendon DeSimone is a Realtor® and real estate expert based in San Francisco and New York. He is a contributor to Zillow Blog, has collaborated on multiple real estate books and is often quoted by major media outlets. Follow Brendon on Twitter.

Rental Property Investing 101 - Tips for future property moguls!

The media and real estate professionals continually report that 2012 is the year to buy real estate. Since home values have dropped considerably, the U.S. median list price has dropped considerably, too. Couple that with interest rates that are the lowest they’ve ever been and it’s a perfect storm of real estate buying opportunity, especially for starting out your career as a landlord.

Note: If you are one of those folks that believes you can predict the future and hopes prices will go down, they may. But interest rates might go up which would nullify any gain you would hope to obtain from any price decrease. But more importantly, all investments fluctuate in value over time. You should not be concerned about short-term fluctuations in a long-term investment, like real estate. If you buy sooner over later, ten years down the road not only will you own more properties overall than someone who waits, but you’ll most likely have earned significant equity in all of them. And you won’t care about any price fluctuations that might have occurred in 2012, 2013, or 2014.

Here are tips to get started. And, if you start a few years out of college, and amass several properties, you will probably be retiring early.

Go for the long haul — Rarely do people increase their wealth by owning property for short periods of time. Long-term investing in cash flow-producing assets like real estate is the way to go.

Don’t’ give up your day job! – You need a solid job to be able to save money for a down payment and be able to obtain financing to buy properties.

Buy cash flow-positive properties – If you don’t understand why to do this, you might want to skip real estate ownership. See “What is a Good Real Estate Investment” article.

Buy a property that you love! – The more you love the property for all the right investment reasons, the better chances you’ll own it long term.

Skip the prize properties – Prize properties have negative cash flows and are NO prize, it’s the moderately priced properties that are the real prizes.

Buy as a personal residence to change to rental – Buy properties in life that make good rental property investment sense and first live in them as a personal residence. When you buy as owner occupant, you get the best financing and can put down a smaller down payment if you so desire. Plus you learn the property characteristics, issues, and can fix issues so they won’t be issues once you make it a rental. Then, move out after one to three years and into your next personal residence that will become a rental property a few years later. This also ensures you will only buy properties in areas where you are willing to live, and that’s very important to do as a real estate investor.

If it sounds too good to be true, it is! – Real estate is high risk as there are many things that can go very wrong. If it sounds too good to be true, be very careful. Once you take ownership of the property, you have to correct the problems and issues,or live with them.

Fully educate yourself for 3-6 months – Talk to other people who own properties, read books, go to the local real estate investment clubs, etc. The better you educate yourself, the higher the chances you will take the proper steps to reduce your risks and make smart and safe decisions.

Buy properties in good shape – Fixer-uppers are money pits and rarely sell at a large enough discount to compensate for all the work needed. Buy properties that are as close to rental ready as possible. A great move, if possible, is to buy a property with a good tenant already renting the property!

Be conservative on your expectations – Always overestimate the amount it will cost to renovate a property, underestimate the rental income you will earn, and overestimate the expenses you will have to pay. Then, when you blow it out of the water, you’ll have a big smile on your face and be able to gloat to all your friends!

Stay away from high vacancy areas or declining cities – Buy properties in nice, moderate, working class areas where there are not too many foreclosures, empty properties, or in a city or area that is in decline.

Start young, but not before you are settled in a particular city – You want to start early, but make sure you’re somewhat settled before you take on this big responsibility. Have fun when you are young, there is still plenty of time to get rich on real estate. Just start saving your pennies for that first down payment.

Death, taxes, and…. – Those two items are guaranteed in life. But, there is one more item if you are a real estate investor, and it’s 100% guaranteed: If you own real estate, you will feel pain along they way. Things will go wrong, but you will recover and will likely look back on the journey with fondness when you retire early.

And let’s end where we started, once again with the most important item in real estate investing:

Go long! – Long-term ownership will give you the highest chances of entering retirement with a nice rental property cash flow stream. And long-term ownership equity gains will compensate for the hassles and issues you have along the way.