Tips on Surviving a Bidding War.
The laws of economics say that when demand is higher than supply, automatically, the price rises. This is a scenario where a change in one directly affects the other and as such it is quite straightforward. But to explain further, we will cite a scenario. Imagine for a moment that in a free economy, ten people want to buy at least a loaf of bread each and on getting to the only bakery accessible to them, they find out that there are only two loaves of bread. A bidding will obviously ensue and those that emerge as the top two highest bidders will get the two loaves of bread. It is very possible that a single person that has enough money will get the two loaves. At the end, a loaf might be sold at a price 5 times higher than what it costs, all things being equal.
As a result of the COVID-19 pandemic, owners of properties have been quite discouraged and reluctant to put up their properties for sale. This is because of the uncertainties that surround the economic conditions at the moment. As a result of this, real estate investors are going to face a shortage of properties they can sell and this in turn means that only few properties will be available for sale even as the economy seems to be on a recovery journey. However, the demands for properties are on the high side vis-à-vis its supply.
According to figures from realtor.com, houses that were put up for sale in June 2020 are all priced at 30% lesser that the houses that were up for sale around the same period in 2019. The properties for sale have not been as many as they used to be and don’t place buyers at a very good seat at the negotiating table. This is because limited properties plus excessive buyers equals bidding wars, the buyer with the highest bid wins even though the price will be far more than it should be on a good day. This is a good news to the seller but can’t say as much for the seller.
However, whether you are a buyer or you are a seller. You will need to get optimum gains from these deals and avoid being misled by the bidding rivalries. Here are some tips to help when the bidding wars start.
Let it be known that you are entertaining multiple bids
It is very important that you declare your intention of entertaining and receiving multiple proposals on the property for sale. You should also encourage all visits. With this you can get all those interested in buying the property together, have them make their bids and t5hen sell to the highest bidder.
Highest Bid doesn’t make it the Best
Selling your property for as high as the price can be is obviously a very good thing and one that all sellers aim at. However, as a seller, you have to rationally analyze all the buyers and their respective bids. This is because putting the price aside, there are many other things that need to be agreed on. It is very possible that the seller might not be able to pay the full price upfront, whereas you are not financially stable enough to entertain a deferred payment. Yes, he can afford to pay the highest price but can he afford to pay the highest price upfront? Also, the buyer with the highest bid might want to take immediate possession of the property and/or move in immediately. But as the seller, you might not be ready to move out immediately.
As a buyer try to make the seller an all-cash offer while bidding for the property. Most sellers prioritize a cash offer. This is because it is trustworthy and also helps avoid any possible kinks that might come up with other forms of payment. Thus, if you bid with cash, the odds of you winning and getting the property goes higher.
Of course, there are other factors like luck, political expertise and so on that also decide the outcomes of bidding wars but these few tips should be of help along the way.