You have no items in your shopping cart.

Win the Bid

Win the Bid

5 Must-Dos to Make Offers in a Bidding War in Today’s Real Estate Market

Today’s housing market is insane. Whether you live in a state that has tax laws that benefit business owners or investors, or you’re in a state that has less COVID restrictions with an influx of people moving to it, you are probably seeing the prices of properties increase and the supply of properties decrease. There is a huge lack of inventory nationwide and now, the way we make offers on properties and get those offers accepted is much different than it used to be.

Back in the day, people could make low-ball offers, cash offers and offers with crazy terms, and it was likely their offers would be accepted if the homeowner was motivated enough. Now? … Forget about it. Buying properties has now become ridiculous. People have become so emotional in the buying and even in the selling process because they believe they need to buy since there is such a lack of inventory. So, what happens is buying a property becomes more expensive as they get into bidding wars. If you want to win those bidding wars, you’ll find out how you can in this post, but beware—you want to be armed with a financial education before getting into any deals. The first rule we teach our students at Legacy is never to get emotional when investing. If you run strictly on emotion when making offers, you may win the bid but turn out losing.

  1. Establish relationships in advance

    You’ll want an established relationship with a real estate agent who acts quickly and works for you. Someone with experience and who knows the neighborhoods you’re looking to invest in is a plus. You also want an agent who isn’t afraid to get on the phone and ask questions.

  2. Make solid offers, but don’t overpay

    A solid offer matters, but not to the detriment of going against your wisdom when buying real estate. Remember, do not get emotional. Make an offer that meets your criteria and budget and that makes sense based on the analysis you did on the property you’re intending to purchase.

  3. Make it personal

    You could go against the grain and use those emotions in a positive way by writing a heartfelt letter to go along with your offer. Deals are people and if people like you, they may want to do business with you. If you tell your story and it resonates with the seller it could make all the difference, whether your offer is the highest offer or not. Sometimes that personal connection can win you the bid.

  4. Eliminate contingencies

    As an investor, we like contingencies and always want to have exit clauses, but you may consider dropping them if you’ve done enough diligence and analysis to make sure your offer is solid. Sometimes it’s not about the cleanest offer, but more about which offer will close. Keep it simple when applicable.

  5. Offer all cash

    Cash offers used to be the special sauce to win the bid, but now, many people offer cash even on multi-multi-million-dollar properties. With the increase in bitcoin-millionaires, we see a lot more of this. Coming in with cash is almost a necessity. If not all cash, then some cash. The creative finance days of offering seller financing or seller carry back still exist but are much more difficult to find.

If you really want to make a deal happen, and you think the numbers will work for your plan, go for it. If you lose the bid, so be it. Move on. It wasn’t meant to be.

When it comes to investing, as much inventory as we lack, there’s always another opportunity down the line with the right property that will make our deal work. It’s important to act quickly but not if you are jeopardizing what you know about investing. It is better to have offered and lost than to have overbid and overpaid. You always want to buy at a discount and never overpay for real estate. Always use your knowledge as your weapon, do your due diligence, and at the very least, you will know that anything above the numbers you set for yourself and any offer accepted outside of the terms of what you need to make the deal happen, is not a loss, but instead, a blessing.

Areas of Review

Takeaway

Big picture takeaway points

  1. Don’t get emotional about a property.
  2. If the deal doesn’t work out walk away, there is always another one.
  3. Always want to buy at a discount.

Reflection

Self-reflection questions to think more about the content

  1. Do I know how to communicate? Establishing a relationship with the seller can sometimes be the difference with getting a property.
  2. Do I have the capital? Cash is king, if you can offer all cash, you can usually get a better deal.
  3. Am I willing to walk away? If it turns into a bidding war and the numbers don’t work for you anymore walk away.

Legacy’s Building Wealth Club offers you the financial education needed to pursue your goals. Let our education and experience lead the way!

Legacy Wealth Club