Bidding strategy these days?

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    Hi, wise Brownstoners — We’ve been looking for a new place since January, but haven’t found anything yet. When we do, though, I’m wondering what the bidding strategy should be? Last time we were buying, it was 2004, so quite a different market.

    These days, is it standard to bid below an asking price (by a certain amount)? I know there are many other factors (how much you want it, how well it’s priced, how many other interested parties there are, etc.) — but just wondering what the best strategy is in 2011. (Back in 2004, we knew we’d have to offer at ask or above for places we really loved to be in the running.)

    Thanks in advance!

    13 Replies

    1. “Right now you could say things might be priced 5 or 10% over ask”

      sorry – – – i meant to say priced 5 or 10% over market

      however some are 30%+ over market

    2. You don’t buy a car based on sticker price (ie asking price). if you’re asking how much to bid based on asking price as a general question, then you don’t know where the market is. Start following the market closely in your target neighborhoods and every house you like, or can get info on, look at sales per square foot. Keep track what is unrenovted vs. renovated and how much it costs to do such work. Then you can start to piece together what is over/underpriced.

      If you read this blog closely, you will see some properties occasionally selling for *way* too much because people lack this basic measure of value (usually those with more cash than brains). Asking prices are all over the board – some are a little high, some are outrageously high. Rarely do you see things priced at value, but of course this has varied a lot over the last 5 years.

      Right now you could say things might be priced 5 or 10% over ask, but if you went solely by that philosophy you would miss out on anything that is really priced to sell.

      One could make an observation that right now a bank isn’t going to appraise something over ask on principle alone (many don’t even want to appraise at ask either), so listing brokers do know this and are not pricing things that close to the going rate as a result.

    3. The only “strategy” you should employ is common sense. Check the comps of the house you’re interested in, and then whittle those down to the houses that are closest to, and in most similar condition to the place you want to bid on. Then, like others have suggested, take into account how long a property has been on the market. If it just went on the market, chances are, a seller is not going to accept a bid too much under ask.
      However, if a house has been on the market at least 4 or 5 months, and seems over-priced compared to other properties, then put in a reasonable bid based on other sale prices of similar properties, computed by per-square foot sale prices.

      There is no rule about how much is too much or too little to offer if you’re basing your offer on comps, the condition of the property, how long it’s been on the market, and your own financials. Sellers will indeed accept a lower offer from someone who is putting 20% down and has great credit over someone getting an FHA loan, and ditto if someone is offering cash and needs no mortgage. Best not to get your emotions involved in the process at all – because then you’re at risk of offering more than you really intended to pay, and can afford. If you get outbid on one place, you’ll almost always find something better.

    4. The only “strategy” you should employ is common sense. Check the comps of the house you’re interested in, and then whittle those down to the houses that are closest to, and in most similar condition to the place you want to bid on. Then, like others have suggested, take into account how long a property has been on the market. If it just went on the market, chances are, a seller is not going to accept a bid too much under ask.
      However, if a house has been on the market at least 4 or 5 months, and seems over-priced compared to other properties, then put in a reasonable bid based on other sale prices of similar properties, computed by per-square foot sale prices.

      There is no rule about how much is too much or too little to offer if you’re basing your offer on comps, the condition of the property, how long it’s been on the market, and your own financials. Sellers will indeed accept a lower offer from someone who is putting 20% down and has great credit over someone getting an FHA loan, and ditto if someone is offering cash and needs no mortgage. Best not to get your emotions involved in the process at all – because then you’re at risk of offering more than you really intended to pay, and can afford. If you get outbid on one place, you’ll almost always find something better.

    5. Augustiner, Fire Alarm Guy was making a joke.

      There certainly was PropertyShark in 2004, and probably Zillow and a couple other things.

      Bid what you think the place is worth based on comps. Many sellers in NYC price 10 percent above what they want to get. Sellers in California do the opposite.

      In most cases, you have nothing to lose by bidding 10 percent below ask. If there is a multiple bid situation already, the broker will let you know.

    6. Get a PropertyShark membership WITH COMPS and get to know the comps in the area – not what people are asking, but what things are actually selling for. One of the most useful measurements is price per sq. ft. but be careful about square footage. The official square feet are calculated a number of different ways and aren’t consistent. Try to figure out actual square feet. $$/sq.ft. and condition will let you know what the sales price should be. Then start below that number, but not so far that it would seem insulting.

      I don’t know the Brooklyn market, but in Harlem things routinely go for $200K below asking. We got our shell for $265K below asking – which was 1/3rd off their asking price.

    7. it depends on the property, but in general you can bid below asking price and still have a good shot at getting the property.

      here are the crucial issues:
      1. how long has the property been on the market
      2. how well is it priced… I think you need to know the market yourself to answer this Q for yourself.
      3. how good is your offer, ie, the bigger your down payment, the stronger your bid.
      4. in this market, deals fall through over financing, if you have strong financials, you can offer a bit less money
      5. how quickly can you close (or can you wait to close…)

      we more than once saw a place go at a very low price to all cash buyer

      FYI, we bought a building in 2009 at a good price and our offer was NOT the highest $$ bid. This is what we did:
      1. shopping and looking over a long period of time so we knew a good value when we saw it
      2. putting in a strong bid with good down payment
      3. being willing to close on sellers’ time frame

    8. @ Brooklyn Fire Alarm Guy
      excuse me – that is just totally useless information. There was a guy some time ago who spammed these words into every forum post.
      A complex procedure like buying and bidding for real estate can´t be summed into 4 words. Beside that how can you even have real comparable listings in a city where the same house costs double on the next block.
      Probably the guy himself didn´t even understand what he was talking about. Ok enough of that.

      @slope2009
      these factors come into consideration:
      – check comparables to get a feel if the asking price is too high, too low, or about right.
      – what is this specific property worth for you personally.
      – time the property is on the market
      – how much competition will there be depending on asking price and visibility of the listing
      – your financial situation (do you have your bank papers ready? Are you all cash?)
      – your personal contact with the seller / seller’s agent

    9. Why do people equate “home”buying to Ebay or the stock-market??? Funny how people spend greater emotional capital buying things from pens & jeans to dishwashers & cars but when it comes to a place they actually (hope) to live in – landing on a figurative and (perhaps literal)”dime” seem to take priority.

      Back in 2004, there were no street-easy, Zillow, Google as we now know it, now there is – use them, even the NYT has past sale data attached to their listings. You see it, you like it, if you can afford it – if it’s not out of whack with comps – you put in an offer accordingly.

    10. I don’t understand what that means! Literally divide the peak comp in half and offer that? Or split the difference between the peak comp and the ask?

    11. As a frequent reader of this site, I have learned to bid half off peak comps.