Archive for May, 2013

Investors Need To Handle A Bidding War With Caution

Thursday, May 2nd, 2013

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Those investors who didn’t get involved in the market immediately following the market crash aren’t likely to find rock bottom deals.  As less distressed sales are on the market, property values have improved.  The buyer’s market has quickly shifted to a market that favors sellers, but those investors who research the industry can still find profitable deals.  Be aware that investors who are currently pursuing the market might end up getting into a bidding war and they need to have a game plan for dealing with how they handle the situation.

While a bidding war is certainly not ideal for real estate investors, sometimes an investor pursues a property that others are showing interest in as well.  Occasionally, an investor will pay full price for a property if growth is likely to continue in the area and if they are able to rent it out for a positive ROI.

When engaging in a bidding war don’t pursue it as a game and be sure to back out when the numbers no longer dictate profitability.  The number one rule to being involved in a bidding war is to know where the profit line is.  If the other party bids above this line, don’t become emotionally involved in the purchase and feel like it is a good idea to out bid them.

Investors who stick to comps in the area are able to accurately determine the top value they are willing to pay for a property.  When actively involved in a bidding war don’t even think about what the other party is likely to bid, as it is irrelevant.  When considering a final bid, have an estimation of all the costs that need to be paid after closing.  As most investors purchase properties that are likely to need some improvements, it is essential to understand the costs of these improvements when submitting a bid.

Some investors over bid on a property because they know that a buyer will likely pick them out of the group.  They then know that the bank will have their own appraiser come in and deem that the property is worth less.  After this, they will do their best to convince the owners of the property to drop their price in order for an investor to secure the loan.  This practice is unethical and can backfire on an investor.  Don’t make this a practice in order to win a bidding war.

The most important thing to consider when engaging in a bidding war is the bottom line.  Have all the calculations done prior to bidding and know the value at where the property is no longer a profitable purchase.

Asking questions with these tips in mind will help save real estate investors thousands.  For more ideas related to real estate investing, call or visit us a Homevestorsfranchise.com.  We are the nation’s number one home buying franchise with over 15 years of experience.  Our company has a vast assortment of real estate investment and real estate franchise opportunities available to help you grow your real estate business.  Come see us for more information.