Property investment is a highly competitive business, at least during the buying stage. You want to get the lowest price possible so you can maximise your return on investment.
But, other potential buyers want the same, which can result in a bidding war. To stop this from happening to you, here’s how to secure a property when up against other buyers.
1. Build up Connections
Granted, this is a long-term solution, but it pays off. Whether you’re looking for property from estate agents or at auction, make the effort to build connections with those in charge.
Money talks but reputation matters. You want the agent recommending your offer, regardless of whether it’s the highest.
And here’s the secret – most agents just want a reliable buyer. While they will of course try to get the most for their client, they will FIRST make sure that whatever they are putting forward is real, and from a reliable buyer. So if you have a track record that’s great. If you don’t, be honest and approachable. And if at all possible – memorable. There are a LOT of property investors out there these days.
Always be friendly, reliable and professional. It really does make a difference.
Building connections is a slow game. While it might not result in you being picked over a buyer with a better offer, it could mean you find out about the best properties early, allowing you to get ahead of the competition.
2. Understand the Market
This is about more than just researching the property you want to buy. It also means knowing the current state of the property market in that area.
Find out comparable prices (or ‘comps’). Your mortgage valuer is going to do this anyway when you want to get a loan, so make sure you know up front. It’ll help you pay the right amount of money too as you’ll instinctively have a better understanding of what to pay.
Iif the market seems stagnant, or there’s minimal demand for this type of property, make sure that is reflected in your offer. If you’re the only game in town, that gives you a lot more leverage than you would otherwise have. Equally, if everything is flying off the shelf, act fast! You might need to so you don’t miss out. But be careful acting fast doesn’t push you to over pay.
But, if you can make some real money on the property, it might make sense to go in with a high initial offer. Doing so should scare off other potential buyers unless they’ve done the same research.
3. Show You’re Able to Complete Quickly
As a buyer, if you can prove you’re able to complete the sale quickly, you should get picked over other buyers who might have to delay. If you have a mortgage lined up – or don’t need one – and aren’t concerned about the property’s condition, you’re in a good place to close.
Make it obvious to the seller that you’re able to complete the sale ASAP and this might just give you the upper hand.
4. Don’t Underestimate the Power of Cash
In real estate, cash is still king. If you‘ve got cash for a property purchase and you’re willing to prove it, you may easily beat almost every other bidding strategy. (But don’t OVER-estimate the value of cash. It’s surprising how a competing offer at just a slight increase might be FAR worse, but often sellers are swayed by the bigger number, even if the buyer is worse).
Mortgages need lots of paperwork and things can go wrong. Paying with cash means you can take the property now and there are no strings attached.
***** PRO TIP *****
WARNING: This is not one for your first purchase!
If you are able to buy in cash, talk to your solicitor about waiving searches in favour of search insurance. This can massively speed up the process.
5. The Asking Price is Just A Guide. Offer What the Property Is Worth To YOU
Work out your numbers and offer the best you can. If it’s significantly below the asking price, double check your figures and if you’re confident, stay strong and go with it. You may need to explain why you’ve come to that conclusion (there’s no need to annoy anyone!) but don’t be shy. If you’re right, approaching the discussion with honesty may just get your foot in the door before anyone else.
If your figures say you can offer MORE … consider if this is right. My experience is people rarely want to offer over the asking price. But sometimes it can work. If the deal still works for you at the higher figure, why WOULDN’T you offer over asking? Do what it takes to get it, at a level that works for you.
There are 2 key rules to remember:
If you’re in a competitive bidding situation. The point of the offer stage is not to buy the property that comes later. The point is to get rid of all the other offers. To bet on them. To be the only one left standing, the only game in town. Once you’ve done that … then you can look at the details.
This one is really important, but can be tricky to understand, bear with me:
- The most important thing about your offer is that it works for YOU. Work out a price range – low and high, and any other requirements, ‘must haves’, aspects you can offer etc etc. This is all in relation to what’s important to YOU.
- After you’ve done no. 1 and within that, think through the deal from the perspective of the vendor and work out how you can shape the best possible offer for them, with what you know of them. Again, make sure it’s within the bounds of no. 1.
Using these strategies will help put you in the best possible position to secure a property. There might still be reasons why it doesn’t work. If that’s the case, then understanding what went wrong and adjusting your strategy accordingly should give you better results next time. Keep going. Don’t give up. You’ll get better with each attempt and before you know it, you’ll be the one buying your next house!