I know it’s hard to believe in light of what the media’s been saying, but my duplex buyers and are actually running into multiple offer situations in the investment property market.
What kind of properties are we seeing bidding wars on?
Usually aggressively-priced Minneapolis and St Paul duplexes located in popular neighborhoods that are in good to very good shape.
Most of the time they’re owned by the bank, Freddie Mac or Fannie Mae.
And most of the time, there’s a feeding frenzy of buyers, making the sale of the duplex an awful lot like an auction.
So what kind of properties are being accepted on these properties? A winning bid may have one or more of the following characteristics:
It was the highest offer. Remember, banks lent the previous owner far more money to buy the duplex than they will recoup selling it.
It had the fewest contingencies. While it’s always wise to have an inspection done, you may find doing one, without your offer being contingent on being satisfied with the results to be more appealing to an institutional seller.
It had the biggest down payment. Sellers often view the down payment of an offer on a duplex to be an indication of the financial strength or weakness of the buyer. Right or wrong, the thought is the more someone has saved for a down payment, the more apt they are to be financially healthy.
It had the biggest amount of earnest money. Similar to the down payment amount, a larger sum of earnest money conveys a similar message of strength.
It was all cash. In a volitale duplex market, sellers often fear their property not appraising for the amount they either have it listed at or have accepted a purchase agreement for. In the event that happens, they will find themselves either having to renegotiate a contract with the buyer, or relisting the property all over again. A cash offer is not contingent upon an appraised value, and is therefore, more of a “sure thing” to the seller.
Now I realize it isn’t always possible to employ any or all of the tactics above. However, knowing them may help you understand the “why” of losing out in multiple offers.