4 ways to avoid getting outbid
It's frustrating to put in offer after offer, only to be one-upped by someone else. Here are ways you can win these bidding wars.
Q: I am a first-time buyer trying to buy a condo, but every time I put in an offer, someone else gets it instead. In some cases, I was muscled out by people who could pay cash. I can't afford to do that. Is there any other way I can win one of these bidding wars?
A: Although it remains a buyer's market in most parts of the country, you're looking for a place where there's scant inventory: According to a recent search on Loma Linda (Calif.) Real Estate, only seven multifamily homes were for sale within the town borders. With such short supply, it's not surprising that prices have skyrocketed: DataQuick reports that in March, the median price for a condo was $176,000, up 120% from a year earlier.
Still, there are ways to get ahead of the competition. Here are some tips:
1. Be first: I presume you're working with a buyer's agent; if you're not, you should be. Make sure that the agent knows that you want to jump on any appropriate property as soon as it becomes available. Also, put a tight deadline on your offer so the listing agent can't use it to solicit other offers from interested buyers.
In a blistering-hot market, I once made an offer on a condo, sight unseen, on the day it was put on the multiple listing service. I made it clear that because I didn't want to get into any bidding wars, the offer would be withdrawn in exactly one hour. My offer was accepted – including the clause that gave me the right to back out of the deal if I didn't like the unit after I saw it.
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- On our blog: Do the math before you buy: It may be cheaper to rent
2. Be pre-qualified: Although you can't pay all cash, if you have a letter from a lender saying you'll qualify for the necessary loan, you'll be in a stronger position. Because lending standards have toughened, be prepared to make at least a 20% down payment. To prove you're serious about buying, offer the seller a substantial earnest-money deposit as well — up to 3% of the purchase price.
3. Be highest: Obviously, sellers want to get the highest price possible for their property, so a generous offer will trump an all-cash one. But ask your agent to do a comparative market analysis first so you don't pay more than the market price. If you do, your deal will fall through – or you'll be asked to put up more cash – once the lender has the condo appraised.
4. Be easygoing: A survey last year by the California Association of Realtors found that three-quarters of all sellers are putting their property on the market because of financial difficulties. So although I would never suggest that you waive an inspection contingency, don't demand any monetary concessions, like a decorator's allowance, or help with closing costs. Similarly, ask your agent to find out if some accommodation on time would suit the seller's needs – perhaps a quick closing date for a seller who's having trouble paying the mortgage or, conversely, a long rent-back after closing for sellers who need time to find another place to stay.
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We have been looking for a home for our family to live in since January 2012. It's now August 2, 2012, dozens of contracts later we're fed up with the market in Lincoln, CA. Why do they list houses for sale when they really aren't for sale to families, ONLY TO CASH PIRATES. I heard that the City of Lincoln, the BANKS and the listing agents in Lincoln are all in this scam together!?
Perhaps Real Estate practices/rules/laws should be changed to reflect Johnny's ethics. That would be good for all of us!
Imagine being able to TRUST the agent!!!!!!
you're missing the point. There is no such thing in this market as a city with no inventory. Th einventory may be dribbled out in a constant stream, but it is still there. Stop buying into realtor make-believe that regions exist with no inventory; it's less believeable than the idea that areas of the country exist in which unicorms prance and gamble around freely. If a seller wants to believe that myth, great. But don't make teh mistake of buying into it and allowing a seller to transfer his or her circa 2005 mistake to you.
This column misses the single most important point: be patient. if your offer is not accepted; walk away. There are lots more homes than demand, and any realtor who tells you otherwise is being dishonest. The homes may come at a continuous trickle rather than a one time flood, but the well is just as deep either way. Be patient and don't panic. A s abuyer you can afford to demand the best deal, and if the seller refuses and some other sucker is willing to take a worse deal, just breathe a sigh of relief that you dodged teh bullet and move on to the next one.