Having Trouble Purchasing Property in a Competitive Market? Check out these tips.
Investing in Real Estate in a Competitive Market can be challenging. It is common to have multiple offers on most appropriately priced properties, and it becomes increasingly important to craft your offers in a way they stand out from the rest. Off course offering more money is the easiest solution, but there are other things you can do to improve your chances of purchasing that next investment property.
Write a personalized hand written letter to the seller. This helps bring out the human factor of the offer. Explain why their home is special and why you want it.
Keep you inspection conditions as short as possible. Usually five days is sufficient. You can also do inspections before making the offer, but then you risk losing your inspection money if your offer is not accepted. Alternatively, you can make your condition of inspection as-is, stating that the price will not be reduced based on the inspection and no repair requests will be made of the sellers. If the inspection identifies deficiencies the buyer will take on doing the repair, or will walk away from the deal.
You can always opt not to have a financing or appraisal condition. Obviously, don’t do this if you can’t afford it. Be aware that in rising markets appraised values trail market value. If the property gets appraised for less than the purchase price you will need to pay that difference in cash. Speak with a qualified mortgage broker before doing this.
Depending on the jurisdiction you’re investing having an escalation clause in the contract can be help in competing with multiple offers. So say your offer is $100,000, you can have a clause that you will increase your offer over $100,000 to a certain point. It’s a way of saying you are willing to offer more, but not doing it unnecessarily. If the escalation clause is triggered, sellers would show proof of other offers to the buyer. Note this clause would conflict with the Real Estate Business Brokers Act, 2002 as far as handling multiple listings in Ontario. Therefore, in Ontario it’s only really effective for sales done by the owner or through a lawyer. This strategy is jurisdiction specific.
Consider putting a large deposit on the offer such as 10 percent, instead of the standard 5 percent. Ultimately it will go towards the down payment. This improves the perceived seriousness of the offer, and a small deposit signals a buyer may be uncertain about the property.
Be flexible on closing date to accommodate the seller. If the property is vacant a fast closing would be desirable. If the sellers don’t take possession of their new home for 90-days a later close date would likely be preferred.
In conclusion, there are more factors than just price in structuring an offer, especially when there are several offers around the same price point. Sellers will often take a lower price if the conditions are favorable. To maximize your chance of success take a personalized approach, by taking the time to find out what the sellers want, and carefully crafting the offer to take all aspects of the sellers needs into consideration.