I keep getting outbid on home offers I’m making

Buying & Selling Real Estate
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I keep getting outbid on home offers I’m making

Caleb Haynes
Investor · Texas (SETX) · Member since 2021 · 20 posts · 9 votes

I keep getting outbid on home offers I’m making on single family homes.

HOW MUCH OVER ASKING PRICE DO I NEED TO OFFER?

I’m looking in the Tyler, Texas area, doing a conventional loan.

I offered day of, full asking price with pretty good terms (2% in Ernest ) and was not chosen.

So then I started to sweeten the deals. I offered on a house day of last week at 2% OVER asking price. They still went with someone else.

How far over asking price have y’all seen people bidding recently?

Is this getting too out of hand? Should I just wait for a crash? (Realizing that could be YEARS) from now

Just looking to see what others are observing in other areas or situations

Thanks!

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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
5y

Are you just interested in winning a bid or are you interesting in getting a value?  "Winning" by overpaying as an investor is losing in my book

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  • Joanne Tsai
    Investor · Millburn, NJ · Member since 2018 · 141 posts · 100 votes
    5y

    @Caleb Haynes Rentometer is some time lagged in my experience, so i listed a SFH for $1900 a month and it was rented in less than 2 weeks after being posted on Zillow in March, Rentometer would suggest somewhere between $1800-$1850. You can search what's available on Zillow or apartment.com or realtor.com and get a feel of how much you can charge for in the area. on Zillow, you can also see if there is a lot of traction, such as number of contacts, or number of applications. if you see something gets listed less than a day and has 50 contacts, it gives you a sense that it will likely to get rented at that price because the demand is very strong. your realtor should be able to tell you all these comps before you purchase.

    0Reply
  • Bonnie LowPro Member
    Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
    5y
    SO many markets are experiencing this right now due to interstate migration, historically low interest rates, housing shortages nationwide and foreign investors buying properties in the US because it represents a "safe" place to park their money. All of this is driving up prices and resulting in bidding wars. Great if you're a seller, not so much if you're trying to buy. 2% over asking price actually sounds reasonable from where I'm sitting. We're definitely seeing much, much higher competition. Also understand that there are a LOT of cash buyers right now. So you're not only trying to come in with the highest offer, but the best terms as well. Cash will almost always win, regardless of how much you raise your price, because the seller knows there's very little chance the buyer won't be able to close. Bottom line, it's hyper competitive, and your best bet is to try to find off market deals so there will be less competition if you're in a really hot market.
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    2Reply
  • Account Closed
    Rental Property Investor · Indianapolis, IN · Member since 2020 · 562 posts · 554 votes
    5y

    @Caleb Haynes

    It sounds like you have a lot more research to do before you continue putting in offers. Glad you are charging ahead, but take a few weeks to educate yourself before you make another offer. Set a goal to get your research and education done and do it. Look for the BP 90 day challenge. It is a basic roadmap to purchase your first property within 90 days.

    There are a bunch of books, podcasts, webinars, and blogs on BP that can be very helpful that are either free or reasonably priced.

    As someone else said, rentometer can lag behind a bit. But it is a good tool if you stay in the “average” range. It will give you conserve numbers that will help you figure out at a high level if a deal is even worth it, and how much you can offer. Once you get past that first high level test, then you can really dig in to the specifics and make sure it works.

    In my experience the rent numbers on Zillow aren’t as far off as the zestimate for home prices. Again, it is just a guideline for you to use and there are lots of variables that can affect what you charge for rent.

    If you are chasing deals on the mls and bidding against everyone and their brother, it likely won’t work as an investment. Try Looking for properties that have been listed for more than 60 days. There is probably something wrong with it that your typical home buyer is afraid of, but that as an investor you can capitalize on.

    0Reply
  • Caleb Haynes
    OP
    Investor · Texas (SETX) · Member since 2021 · 20 posts · 9 votes
    5y

    @Dave E.

    My point is, if it’s on Zillow for 1500 a month, and it looks good in the same location... then 1500 is obviously too much. So I should budget something more like 1400 because I don’t see any for rent at 1400

    Right?

    0Reply
  • Account Closed
    Rental Property Investor · Indianapolis, IN · Member since 2020 · 562 posts · 554 votes
    5y

    @Caleb Haynes I don’t know the area or your numbers, so I can’t really comment on specifics. You just have to put in the work and figure out what works for you.

    Best of luck to you!!

    0Reply
  • Caleb Haynes
    OP
    Investor · Texas (SETX) · Member since 2021 · 20 posts · 9 votes
    5y

    @Dave E.

    I know you don’t have specifics; but regardless of area or specifics, let’s say it was the Indianapolis area.

    If you see a property listed for $1500/month, and it’s been that way for a month or longer, then one of two possibilities must be true.

    1. The demand is not there in that area for that property to go at $1500/month (possibly due to oversupply of new investors and increased single family homes now being rented out rather than being used as buyers dwelling place)

    2. The property is overpriced for the area

    Therefore, when looking at property rental prices in an area, you will likely need to budget based on a rent below those in the areas long lasting posted rental prices.

    Do you agree with that logic?

    0Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    @Caleb Haynes

    In my area you need all cash, no inspections, no contingencies. Or inspections for knowledge only.

    2% over list is nothing.

    Personally I don’t play these games and overpay. I’ll just sit and wait.

    2Reply
  • Caleb Haynes
    OP
    Investor · Texas (SETX) · Member since 2021 · 20 posts · 9 votes
    5y

    @Matt M.

    So these people that are doing no inspections.... they are just gambling that there is nothing wrong with the property? Or have the cash to fix whatever it is that could possibly be wrong?

    0Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    @Caleb Haynes

    Yes sir. Very common. Most seasoned/experienced investors out here don’t hire a home inspector no matter what the market is like. We can spend less than an hour in a house and know if it’s good or not. You have to expect the unexpected, and have funds to fix stuff. There’s things that home inspectors miss anyway.

    3Reply
  • Paul Shannon
    Rental Property Investor · Fishers, IN · Member since 2016 · 337 posts · 470 votes
    5y

    No deal is better than a bad one.  Set your criteria and don't budge.  Go out of that market if it doesn't meet your investing criteria.  Don't force it.  Or invest in something else.  There's plenty of ways to make money outside of real estate.  There's also plenty of ways to make money in real estate, so maybe adjust your strategy.  There's funny money out there right now.  

    0Reply
  • Account Closed
    Rental Property Investor · Indianapolis, IN · Member since 2020 · 562 posts · 554 votes
    5y

    @Caleb Haynes there are dozens of reasons a property may sit on the market. Indianapolis can be very street by street. So a $1500 house on o e street may rent in a couple days. Two blocks over that same house may take longer and only rent for $1400. So it is very hard to generalize.

    My point is you should always use a conservative number when calculating your deals. And only you can decide what those numbers are. So if $1400 is the conservative number that you think is right, use that in your calculations. Then if you end up renting it for $1500 that’s awesome!

    0Reply
  • Caleb Haynes
    OP
    Investor · Texas (SETX) · Member since 2021 · 20 posts · 9 votes
    5y

    @Dave E.

    Thanks for all the help Dave! That makes sense

    0Reply
  • Justin Polston
    Property Manager · Shelbyville, IN · Member since 2014 · 303 posts · 161 votes
    5y

    @Caleb Haynes just sort of chiming in late here, but I have been discussing lots of things with lots of folks nationwide. And few people independently gave me an interesting and new (new to me but probably not new to everybody) thought:

    Is real estate the most expensive it has been but also the least expensive it will ever be?

    4Reply
  • Zachary Beach
    Specialist · Los Angeles, CA · Member since 2018 · 291 posts · 231 votes
    5y

    @Caleb Haynes similar to the post before me I would ask is real estate up or is the dollar down. I would argue the ladder. The next question is can you get the rents to catch up? The rents at some of my properties catch up because I do STR's but how long if ever will LTR's take to catch up?

    0Reply
  • Caleb Haynes
    OP
    Investor · Texas (SETX) · Member since 2021 · 20 posts · 9 votes
    5y

    @Justin Polston

    I completely agree, this why I am willing to overpay for properties. HOWEVER, I’m trying to be conscientious of the fact that salaries in the area are NOT increasing. So therefore, people can’t afford the hikes.

    The economy is not booming. However, maybe pay raises will follow? I doubt it as our “cost of living” annual salary increase was a record low.

    0Reply
  • Stephen Karagosian
    Investor · Colorado Springs · Member since 2020 · 53 posts · 31 votes
    5y

    @Caleb Haynes pump those numbers up!!!

    0Reply
  • Gabriel Jordan
    New to Real Estate · Member since 2019 · 38 posts · 11 votes
    5y

    @Caleb Haynes

    In my market it’s about 30k over asking. Just lost to one that was 50k over with no contingencies

    0Reply
  • Amber Boskers
    Rental Property Investor · Scottsdale, AZ · Member since 2018 · 36 posts · 33 votes
    5y

    @Caleb Haynes Zillow is a tool but it's not always an accurate tool... don't base your underwriting or projected rents on Zillow. Use Zillow in addition to several other resources to get your numbers. Conventional financing with 2% down isn't a competitive offer if you are up against other offers providing higher down payments or full cash offers. Consider increasing your earnest funds, pivoting to a different market or looking into finding off-market deals. Or just keep submitting offers on properties in your preferred area and maybe you'll get a deal. Good luck in your search.

    0Reply
  • Gerardine Tshouongang
    Dallas, TX · Member since 2021 · 31 posts · 12 votes
    5y

    @Joshua Noth what is an appraisal waiver a d a buyer approval waiver please?

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Caleb Haynes:

    I keep getting outbid on home offers I’m making on single family homes.

    HOW MUCH OVER ASKING PRICE DO I NEED TO OFFER?

    I’m looking in the Tyler, Texas area, doing a conventional loan.

    I offered day of, full asking price with pretty good terms (2% in Ernest ) and was not chosen.

    So then I started to sweeten the deals. I offered on a house day of last week at 2% OVER asking price. They still went with someone else.

    How far over asking price have y’all seen people bidding recently?

    Is this getting too out of hand? Should I just wait for a crash? (Realizing that could be YEARS) from now

    Just looking to see what others are observing in other areas or situations

    Thanks!

     maybe not a crash but when things calm a little ???  one thing I have always seen in 4 decades of this business is that sales slow from the perceived notion of the holidays  so Nov 15 to Jan 15 usually sees a season slowing.. ??/ some of my best deals at the court house were the week of Thanksgiving.. most folks take the week off I was there bidding :)

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    3Reply
  • Joshua Noth
    Real Estate Agent · Austin, TX · Member since 2020 · 338 posts · 296 votes
    5y

    @Gerardine Tshouongang They are two contingencies you can waive as a buyer.  In short:

    Buyer approval is the final "green light" from the lender. This can be found in paragraph 2A in the TREC Third Party Financing Addendum.

    Appraisal Waiver says that you, as a buyer, will make up any difference found in appraised value versus offer price.  For a BRIEF example: You offer 110k on a house, and once under contract, the appraisal values it at only 100k.  With this waiver signed, you have to bring that difference (10k) to the table in cash.  This can be found in the TREC Addendum Concerning Right to Terminate Due to Lender's Appraisal

    Hope that helps!

      1Reply
    • Jonathan R.
      Investor · Wichita, KS · Member since 2017 · 584 posts · 813 votes
      5y
      Originally posted by @Caleb Haynes:

      @Brandon Goldsmith

      Deals off the market as in craigslist? Facebook marketplace? The newspaper? Where do I find deals off the market?

      I have heard of wholesaling, but how do I get in touch with someone that does wholesaling?

      To find off market deals you need to be networking with other investors and wholesalers. You know all those annoying bandit signs you see that say, “I buy Houses for Cash” etc? Why not try calling the phone numbers on those signs and see if they have properties off market to sell you. If they don’t, give them your email address for when they do. Also, go to real estate meetups and introduce yourself at the meeting and let the group know what you are looking for. Run a Google search to find meetings in your area. You need to get on every wholesale list you can by providing the wholesalers your email address. They’ll send you deals as they come up; they want your email address as badly as you want to see their off market deals, win win don’t be shy. There are likely Facebook groups you can join that focus on wholesaling, join them (there are two or three in my area) and make a post requesting to be added to the wholesalers that are in the group’s buyer’s list. Search Facebook groups that have the name “wholesale” in the title of the group. 

      0Reply
    • Kevin Douglas
      Investor · Bend, OR · Member since 2019 · 61 posts · 68 votes
      5y

      I just bought a house in a HIGHLY competitive market (Coeur D’Alene, ID). Double ended the deal, using the sellers agent. Here were the terms I used: 

      -$20,000 over asking 

      - 10% earnest 

      - 6 day inspection contingency, where after owner keeps earnest after 6 days

      - no financing contingency 

      - rent back to owner free of cost 

      I pretty much asked the sellers agent what type of offer they would accent on the spot, without going to a bidding war and she told me. Had it under contract within 4 hours of it hitting the market. ARV +/- $100,000+ after CapX

      0Reply
    • Gerardine Tshouongang
      Dallas, TX · Member since 2021 · 31 posts · 12 votes
      5y
      Originally posted by @Joshua Noth:

      @Gerardine Tshouongang They are two contingencies you can waive as a buyer.  In short:

      Buyer approval is the final "green light" from the lender. This can be found in paragraph 2A in the TREC Third Party Financing Addendum.

      Appraisal Waiver says that you, as a buyer, will make up any difference found in appraised value versus offer price.  For a BRIEF example: You offer 110k on a house, and once under contract, the appraisal values it at only 100k.  With this waiver signed, you have to bring that difference (10k) to the table in cash.  This can be found in the TREC Addendum Concerning Right to Terminate Due to Lender's Appraisal

      Hope that helps!

        It helps a lot thank you! 

        0Reply
      • Tyler Williams
        Dentist · Taylorsville, UT · Member since 2013 · 102 posts · 68 votes
        5y

        @Caleb Haynes

        Keep at it. The first deal I made an offer on I was a backup.

        We ended up getting it at full price when the first offer(s) fell through, and now it’s nearly tripled in value on 8 years!

        0Reply
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