• CLICK TO CALL (888) 771-7667
  • CLICK TO EMAIL

US Lending Corp

  • Home
  • Pre-Approval
  • Loan Programs
    • VA Loans
    • Conventional Loans
    • Refinancing
    • FHA Loans
  • Lending Team
  • Search Homes
  • News
CONTACT US

10 Mistakes To Avoid When Bidding On A Property

by Richard Surek / Friday, 17 May 2019 / Published in US Lending News

Real estate can be a competitive industry. Depending on the property type and location, bidding wars can quickly get heated and emotional.

Because of this, many investors can make some missteps in the bidding process, costing them valuable time, resources and property deals. To help you avoid a similar fate, we asked a group of Forbes Real Estate Council members to name some common property bidding mistakes. Here’s what they said to watch out for:

Members discuss a few things to avoid when competition develops.

Photos courtesy of the individual members

1. Getting Caught Up In The Hype Of Quick Buying Trends

Low-interest rates, lower inventory and a surplus of buyers have changed investors’ buying habits. We have seen more and more waived appraisal contingencies and buying of houses unseen based on price point and geography. The important buying principles still apply: Do your research on that home, especially on comparable homes that have sold in the last 30 days before you make a bid. – Ralph Dibugnara, Home Qualified

2. Assuming That Sellers Are Desperate

Don’t assume that sellers are desperate, and will accept an offer below fair market value. Most home buyers have educated themselves on making their offers competitive by offering waived or shorter contingency periods and faster closing dates so investors no longer have the advantage in that way. – Beatrice de Jong, Open Listings (YC W15)

3. Agreeing To A Higher Price Than You Can Afford

I underwrite a project pretty thoroughly before going in to contract, so I know what I can pay for the land. I start lower and don’t get beyond that number, no matter how much I like the project or get into negotiations with the seller. You have to be very careful in this market because sellers want top dollar for their dirt and can be unreasonable about expectations. – Meg Epstein, Ca South Development

4. Ignoring The Municipal Side Of Things During A Bidding War

You found the perfect piece of real estate, but months of searching have come to a bidding war. Now what? The one area that is often overlooked when we become enamored or drawn into a real estate bidding war, because emotion steps in, is regional or municipal by-laws, city work orders or zoning issues. Always check with the local authorities what is the story behind the real estate. – Frank Deluca, DCL Healthcare Properties Inc.

5. Focusing Too Much On The List Price

I buy a lot of properties from the MLS and many investors focus too much on the listing price. The listing price is a great indicator of the seller’s motivation. I am more concerned with the value of the property to me when making my offer. I could offer 20% less or 10% more than the list price depending on the deal and how much it is worth to me. – Mark Ferguson, InvestFourMore

6. Not Studying Lease Terms

Pay attention to lease terms. If leases expire in less than 18 months, know that you might be searching for a new tenant in 12. A renewal option isn’t a guaranteed extension. The tenant may not renew. Negotiate with the seller to extend leases prior to closing. Also, check that leases don’t expire at the same time and leave you with the potential for 50% vacancy on the same day in the future. – Kristin Geenty, The Geenty Group, Realtors

7. Failing To Research Property Taxes

One of the most significant operating expenses in any real estate investment is property tax. Investors frequently get this wrong in their underwriting, as there is no universally consistent treatment of how taxes will change once a property is purchased. If you are not familiar with what is customary in a particular market, do your homework, as this can help avoid future surprises! – Gary Beasley, Roofstock

8. Not Doing Research Up Front

We always take the time to educate ourselves on issues with the property upfront by hiring experts and gathering bids. As such, we submit our offers to sellers with a list of required capital improvements, proposed costs, a letter of explanation and investor profile. Showing we have done our research tells sellers we are more likely to close so they will often choose our offer over others. – Catherine Kuo, Elite Homes | Christie’s International Real Estate

9. Not Having A Solid Exit Strategy

Don’t get caught up in “auction fever,” especially when capital is easier to come by. Thorough due diligence, a solid exit strategy for the property and a hard limit on the amount they are willing to pay is key—and don’t go over that, despite the exhilaration that comes with the auction process. The numbers that support the exit strategy should drive the investor’s participation in the bidding. – Ross Hamilton, Connected Investors

10. Not Factoring In Your ‘Hold Time’ Expense

Remember to factor in the hold time expense of getting a property stabilized. Chances are that an investor is buying a property that needs at least some repositioning. Renovation expenses tend to be accounted for but don’t forget hold time expenses like taxes and insurance. Expenses without income add up fast. – Beth O’Brien, CoreVest Finance

Tagged under: home-purchase, madison, Real Estate, us-lending

About Richard Surek

What you can read next

Homeownership Falls Further Out Of Reach For American Teachers
Turks and Caicos’ Luxury Real Estate Market Is Hot
Trending Technologies: The Roadmap To AI In Proptech

Recent Posts

  • Affordable Housing Is Doable For Builders And Buyers, But Here’s The Problem

    Attainable housing aims to make homes affo...
  • The Skinny On Standing Seam Metal Roofs

    This New England Farmhouse, in Concord, MA, has...
  • See Why Miami Architect Kobi Karp Is After Your Soul

    Miami architect Kobi Karp Courtesy of Kobi Karp...
  • Modular Plus Tiny Can Equal Affordable Home In Many Cities

    In 2018, the national median household income w...
  • New York City Firm President Gary Malin Talks Future Of Brokers In Age Of Technology

    The New York City brokerage Citi Habitats has 8...

Categories

  • FHA Mortgages
  • Mortgage Loans
  • Purchase Mortgages
  • Refinance Mortgages
  • US Lending News
  • USDA Mortgages

US LENDING CORPORATION

888-771-7667

6720 Frank Lloyd Wright Ave. Suite 104 Middleton, WI 53562
NMLS# 1152122

  • Home
  • Pre-Approval
  • Loan Programs
    • VA Loans
    • Conventional Loans
    • Refinancing
    • FHA Loans
  • Lending Team
  • Search Homes
  • News
  • Home
  • Pre-Approval
  • Loan Programs
    • VA Loans
    • Conventional Loans
    • Refinancing
    • FHA Loans
  • Lending Team
  • Search Homes
  • News

Terms of Use | Privacy Policy | Sitemap

NMLS #1152122 (View NMLS Consumer Access Page)
©2003-2019 US Lending Corporation, Dane County Real Estate and US Lending & Real Estate, all rights reserved. | 6720 Frank Lloyd Wright Ave. Suite 104 Middleton, WI 53562.

Lending services provided by US Lending Corporation, "US Lending & Real Estate" is a registered service mark (d/b/a) of US Lending Corporation, used under license.

Dane County Real Estate LLC License Numbers: WI 700869-91. US Lending & Real Estate Logo is a service mark (d/b/a) licensed to Dane County Real Estate LLC. Dane County Real Estate LLC fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. The Dane County Real Estate LLC main office is located in Middleton, WI. Contact: 877-326-3268. (View License)

TOP