Learn How to Survive a Bidding War with These Tips
In the next couple of months, real estate investors are expected to face a shortage of properties on sale because COVID-19 made the property holders reluctant to sell their properties in the face of uncertain economic conditions that may have driven prices really high. Now, since the economy is enjoying recovery, a few properties are listed on sale but, there are a lot of people on the hunt for a good purchase.
This scenario of excessive buyers and limited properties foreshadows bidding wars.
According to statistics from realtor.com, the houses put up on sale this June are priced at 30% less than the houses listed for sale during the same period in the prior year. The limited number of properties that are up for grab is bad news for buyers. Bidding wars drive the price higher for the property and though this is a good opportunity for the seller, the buyer might find themselves at a disadvantage, having to pay a heavy price to secure the deal.
Whether a buyer or a seller, you need to optimize your gains and not be waylaid by excessive bidding rivalries.
Instructions for sellers:
Declare that you are entertaining multiple bids at the set-out.
This is critical. You announce a set period for entertaining property visits and then open yourself for receiving proposals. This way you can get all potential buyers lined up together and sell your property to the best bidder.
The highest bid may not necessarily be the best one.
Be rational and analyze all the buyers carefully. There are a lot of formalities and technicalities to be discussed with the potential buyer. The highest bidder might not be the most suitable choice. They might not be willing to pay upfront while you may be in a crunch and cannot afford the deferred payment. They might want immediate acquisition of the property while you may not be ready to move out immediately. Analyze the situation and make the decision in favor of what offers you maximum convenience.
Instructions for buyers:
Try to make an all-cash offer.
Sellers usually prioritize a cash offer because it is the most trustworthy way to change hands. There are minimal chances of commitment default. If you bid with cash, your chances of winning multiply manifold.
Get your loan approval before entering the bidding range.
Whatever means you acquire to finance your purchase, get an upper limit of your loan approved before making the bid. This way you can make an informed decision about the real cost of the property you are eyeing by estimating the interest due on the loan you bore to finance the deal.
The rest is dependent on your luck and political expertise because bidding wars require you to be on your toes and make hasty but calculated decisions.
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