How to win a property bidding war
By Mitch Collins | Canadian Real Estate Wealth | April 21, 2015
Q: I want to buy another investment property but I find I am constantly facing bidding wars. Are there any strategies that you would recommend I use when trying to negotiate?
Mitch Collins: This question assumes that you're constantly fighting with other potential buyers to get a property and, right of the bat, you're losing all your negotiating power. What I've found to be more affective is to be proactive and creative in this process.
1. Expand your MLS search. Ask your Realtor to connect you with all of the other Realtors in your target area should a property that meets your criteria becomes available.
2. Scour all the sites and ads. These might include the local FSBO sites, newspaper ads, local online ads, and local spots where people post paper ads. There are often sellers who aren't savvy at advertising and you can often connect with them before every other buyer in your area does the same.
3. Word of mouth. Turn your conversations with people you meet into real estate conversations. Tell people exactly what kind of property you are looking to purchase. If someone finds a deal for you that you otherwise wouldn’t have gotten, offer them a finder’s fee. If they saved you $10,000 or more by staying out of a bidding war, perhaps paying them $1,500 would be a great win-win. This is a very powerful strategy when you are focused on a specific neighbourhood and know exactly the type of property you're looking for.
4. Advertise personally. Put out ‘I Buy Houses’ flyers, advertise in the newspaper, local websites and more. You never know when a motivated seller might see your ad and respond to you directly.
5. Negotiate face-to-face whenever possible. If all else fails and you end up in a multiple offer situation with your Realtor, or even privately, do whatever it takes to present your case face-to-face with the seller. To stack the odds in your favour, go armed with supporting documentation, such as pre-approval positioning from a lender, to give the seller a comfort level that can help you smoothly close the deal.
6. Always include a cover letter with your offer in a really hot market. This should indicate how you arrived at your offer, why the seller should accept your offer, how your offer fits their needs, and finally, to thank them for their consideration.
It's also critical that you uncover the seller’s motivation to sell. When you first make contact, ask a lot of open-ended questions, such as why they're selling, would they consider holding any financing, etc.You can find out the seller’s motivation and figure out how you can meet their needs in a win-win situation as part of your offer.
Mitch Collins is a real estate agent with Century 21 Energy Results. Contact him at firstname.lastname@example.org.