How to Avoid Paying Premium Prices in a Bidding War

by 05 Jun 2013

With so many buyers coming off the sidelines in the past 18 months, it’s no wonder there are still shortages of inventory in many Cities in the U.S. Not too mention, hedge funds like Blackstone buying 1,500 homes in one shot like they did in Atlanta recently. Such activity can really limit inventory and drive up prices.

The biggest complaint from real estate investors in some markets like Southern California and Phoenix is that properties are being bid up over the asking prices. So how do you keep from paying too much on a property when the stakes are high? Here are 3 tips to keep from paying too much:

  1. Decide on Your Max Offer Price and Stay Firm: Once you determine your maximum offer price, stick with it! Sometimes realtors will get your reason all out of whack and may encourage you to offer too much for a property. Don’t succumb to your emotions, stay cool and focused. Stick to your max offer price.
  2. Run Your Own Comparables: A realtor may give you comparables, but run your own comparables, analyze them carefully, and drive the neighborhoods to make sure they are true comparables to the house you are looking to purchase. How far away from your target property are the comparables? A finished basement or a detached garage are examples of things that can throw off the comparables, so ask your realtor the hard questions and make sure your comps are accurate. Don’t allow a tiny oversight in your comparables to cause you to pay too much for a property.
  3. Determine the Repairs Before You Bid: If you can, get inside the property in order to see what items need repairing and what upgrades will be needed. What will be the cost of these things and does the deal make sense once you factor these in?

These are just 3 tips to get you thinking. Can you add anything else to this list to help real estate investors from paying too much for a property in a bidding war?

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