Be prepared to see multiple offers on your desired property
By Ethan Roberts, InvestorPlace Contributor
What strategies can a prospective home buyer use to successfully compete with other buyers? Well, here are a few:
Don’t wait to look at new listings. With homes selling so quickly, the longer you wait, the less likely you are to get the home you want.
If you can purchase a home with cash, do so. It makes your offer stronger than those who have to get financed. With a cash offer, there is no risk of a loan being denied, and a quick closing saves the seller money on insurance, taxes, utilities and maintenance. If you don’t want to tie up your funds for a long period of time, speak with a mortgage loan officer about re-financing the home into a mortgage after six months of ownership. Your interest rate could be a bit higher and you will have a few more closing costs than had you financed it upon purchase. However, the money you save in having no mortgage for the first six months will more than compensate for those costs.
Refrain from making your highest bid until you know if there are other offers on the property. If there are other offers, you will be notified and given a second chance to bring in your “highest and best†offer.
Consider buying a fixer upper that’s been on the market for a long time. Yours will probably be the only offer, so you may be able to negotiate a lower price and can use the savings to make the repairs and cosmetic improvements. Both FHA 203k and Fannie Mae Homepath Renovation loans allow the borrower to roll repair costs into the mortgage.
Don’t be reluctant to bid above list price on a foreclosure. Most of these properties are priced well below fair market value for the neighborhood, so you will likely still be buying the home below the appraised value. If you are buying an investment property as a long-term rental, it makes sense to bid above list price as long as your monthly cash flow is still in double-digit percentages. To determine the annual gross potential return (i.e. before expenses), multiply the likely monthly rent times 12, and then divide that number by your cash basis (cash paid + fix up costs).
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