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4 ways to avoid getting outbid

It's frustrating to put in offer after offer, only to be one-upped by someone else.

Here are ways you can win these bidding wars.

By June Fletcher of The Wall Street Journal


1.) Be first: I presume you're working with a buyers agent; if you're not, you should be. Make sure that the agent knows that you want to jump on any appropriate property as soon as it becomes available. Also, put a tight deadline on your offer so the listing agent can't use it to solicit other offers from interested buyers. In a blistering-hot market, I once made an offer on a condo, sight unseen, on the day it was put on the multiple listing service. I made it clear that because I didn't want to get into any bidding wars, the offer would be withdrawn in exactly one hour. My offer was accepted – including the clause that gave me the right to back out of the deal if I didn't like the unit after I saw it.

2). Be pre-qualified: Although you can't pay all cash, if you have a letter from a lender saying you'll qualify for the necessary loan, you'll be in a stronger position. Because lending standards have toughened, be prepared to make at least a 20% down payment. To prove you're serious about buying, offer the seller a substantial earnest-money deposit as well — up to 3% of the purchase price.

3). Be highest: Obviously, sellers want to get the highest price possible for their property, so a generous offer will trump an all-cash one. But ask your agent to do a comparative market analysis first so you don't pay more than the market price. If you do, your deal will fall through – or you'll be asked to put up more cash – once the lender has the condo appraised.

4). Be easygoing: A survey last year by the California Association of Realtors found that three-quarters of all sellers are putting their property on the market because of financial difficulties. So although I would never suggest that you waive an inspection contingency, don't demand any monetary concessions, like a decorator's allowance, or help with closing costs. Similarly, ask your agent to find out if some accommodation on time would suit the seller's needs – perhaps a quick closing date for a seller who's having trouble paying the mortgage or, conversely, a long rent-back after closing for sellers who need time to find another place to stay.

3 Deadly Mistakes when buying Real Estate 
(Article from InternNACHI) 
Deadly Mistake #1: Thinking you can't afford it. 
Today, buying the home of your dreams is easier than ever before. Many people who thought that buying the home they wanted was simply out of their reach are now enjoying a new lifestyle in their very own new home. Buying a home is the smartest financial decision you will ever make. In fact, most American and Canadian home owners would be financially broke at retirement if it weren't for one saving grace - the equity in their home. Furthermore, mortgage rates are more flexible today than ever and tax allowances favor home ownership. 
Real estate values have always risen steadily.
 
Of course there are peaks and valleys, but the long term the trend is a consistent increase. This means that every month when you make a mortgage payment the amount that you owe on the home goes down and the value typically increases. This owe less-worth more situation is called equity build-up and is the reason you can't afford not to buy. Even if you have little money for a down payment or credit problems, chances are that you can still buy that new home.  It just comes down to knowing the right strategies, and working with the right people.  See below.
  
 
Deadly Mistake #2:  Not hiring a buyer's agent to represent you. 
Buying property is a complex and stressful task.  In fact, it is often the biggest single investment you will make in your lifetime.  At the same time, real estate transactions have become increasingly complicated.  New technology, laws, procedures and competition from other buyers require buyer agents to perform at an ever-increasing level of professionalism.  For many homebuyers, the process turns into a terrible, stressful ordeal.  In addition, making the wrong decisions can end up costing you thousands of dollars.  It does not have to be this way!
 
Work with a buyer's agent who has a keen understanding of the real estate business and who is on your side.  Buyer's agents have a fiduciary duty to you.  That means they are loyal to only you and are obligated to look out for your best interests.  Buyer's agents can help you find the best home, the best lender and the best inspector.  Best of all, in most cases, the buyer's agent is paid out of the seller's commission, even though he/she works for you.
 
Trying to buy a home without an agent at all is, well... unthinkable.
 
 
Deadly Mistake #3:  Getting a cheap inspection. 
Buying a home is probably the most expensive purchase you will ever make.  This is no time to shop for a cheap inspection.  The cost of a home inspection is very small relative to the home being inspected.  The additional cost of hiring a certified inspector is almost insignificant.  As a homebuyer, you have recently been crunching the numbers, negotiating offers, adding up closing costs, shopping for mortgages and trying to get the best deals.  Do not stop now.  Do not let your real estate agent, a patty-cake inspector or anyone else talk you into skimping here.  
  
InterNACHI front-ends its membership requirements.  InterNACHI turns down more than 1/2 the inspectors who want to join because they can't fulfill the membership requirements. 
 
InterNACHI certified inspectors perform the best inspections by far.  InterNACHI certified inspectors earn their fees many times over.  They do more, they deserve more, and yes they generally charge a little more.  Do yourself a favor...and pay a little more for the quality inspection you deserve.

Buyers' and sellers' worst enemy? Themselves

Your brain may react too many things in a real-estate deal, including the attractiveness of the real-estate agent and a house's wall color. Your brain may betray you.If you have hunted for a house, you probably got a sense that real-estate purchases don't represent consumers at their most rational. Did you like a house or apartment more or less depending on whether you saw it on a sunny day? Chances are, you did.Buying a house isn't the same as buying a stock, an air conditioner or even a car. It's not just a product with pluses and minuses, good school system versus a small kitchen, a new roof versus a longer commute. A house represents the kind of life you want to live. And given its cost, a house and the value it gains or loses represent concretely the life you could live. Thus, it can be disturbing — though perhaps not surprising — to realize that people's judgment about real estate is susceptible to many of the foolish forces that affect so many other consumer decisions. In some ways, it may be affected even more.

Research by Michael Seiler, a professor at Old Dominion University in Norfolk, Va., has found that men and women — particularly men — are susceptible to the attractiveness of a female real-estate agent. The more attractive the agent, the more the buyer is willing to pay.Superficial things such as a room painted an ugly color can make people less likely to buy a house, even though fixing that problem is as cheap as a couple of cans of paint.What's more troublesome, though, is how attached our minds get to the perceived value of our house. In one study, economists David Genesove and Christopher Mayer looked at the spectacular bust in condominium prices in the early 1990s in Boston. When a market goes south, as the housing market did recently, standard economics tell us that sellers should recalibrate their expectations and behavior, knowing they must sell for less.Of course, this isn't how our brains work. Instead, we're susceptible to loss aversion, the mental quirk by which we feel losses much more sharply than we feel gains. Instead of setting the price of our property by what the market will bear, we set it by what we paid and what we think we "have to" get.

People who bought at or near the peak of the Boston condo boom listed their properties for around 35% more than others. Consequently, those overpriced properties sat on the market; fewer than 30% sold after 180 days. Another wrinkle: Owners who lived in the units showed about twice as much loss aversion as people who had bought them as investment properties. A home, it seems, makes us more irrational than a house.

It doesn't take a boom or bust to trigger this phenomenon: A more recent study says that homeowners consistently overestimate the value of their homes by 5% to 10%. The only cure for this seems to be buying a home during a slump; these buyers may underestimate their home's value.

Buyers getting in now, then, may be at a cognitive advantage for years to come. Boom buyers, meanwhile, must come to terms not only with economic losses but also psychological losses and regret.