How Can I Avoid a Bidding War When a Second Investor Appears Before I Have a Contract?

4 Replies

I have been working with a seller about a house that has had their relative living in without paying rent, and the relative has treated the house badly. The owner would like to sell and I haven't been able to see the house as the resident is away and the owner doesn't live locally.

In speaking with the seller, I was told quite happily that now there is someone else  interested in buying the property due likely to more direct mail and that both parties can see the property at the same time; I cringe with each passing mail day at how many more may appear.   

What might be some approaches others use to position themselves better and avoid a bidding war? Some ideas might be not being the first offer, showing solid proof of funds in my own name, a larger earnest money deposit, short closing date, asking if the other offer has an assignment clause whereas mine doesn't,  or not sending a signed offer - as Sean Terry suggests. He explains that when one has a signed offer, its easy to go back and forth getting higher offers. But if its not signed and you agree to sign when agreement is reached you wont be upsold so much.

Any other suggestions on how to better your negotiating position and avoid bidding wars?

I wouldnt worry too much about other offers, or phantom buyers. If you get to see the house, make your offer immediately and forget it. If you get the house, great, if not, find another deal. 

As long as you are basically a cash buyer with a quick close, you should get preference with a reasonable offer.

In my opinion, put your best foot forward with your offer and if you know the numbers are solid then stick with them. There is no 'bidding war' if you don't keep bidding higher. Don't make a bad deal just to get the deal.

A discerning consumer doesn't always go with the cheapest product (or highest offer) if they have met you, trust you, believe you will close quickly and without headaches...they may take a few thousand less (or pay more if you were a contractor for example). People buy the iPhone every day. It is good but spec-wise it clearly is not and has never been the superior product...and they pay MORE than the superior products cost. People get it because they like them and trust them, and other psychological reasons.

What @Eric Bowlin  said, and let me add/emphasize this...."Move Fast", but not so fast that you do something stupid.

Next time try to get the property tied up with a contract before you see it.  Seller indicated the property needs work so you can ask him about floors, kitchen baths etc. You could make the price subject to your review and inspection of the property within XX number of days. If you don't like what you see you can re negotiate or cancel and get your deposit back. I've done it before with just a drive by of the outside. You will also find out how motivated the seller is since he now has XX of days to perform.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here