Buying properties for your Real Estate IRA is competitive. That’s especially true for investment properties, where it’s critical to buy properties at an advantageous price. Real estate investors must be more price-sensitive than retail buyers and owner-occupants.
But these days, It’s routine in many markets for buyers to encounter competitive bidding situations: Where multiple buyers are making offers on a given property at the same time.
According to data from the Redfin Corporation, 61 percent of offers from their agents were facing competition from other buyers in March of 2015. This number has bounced around between 45 percent and 75 percent – the high coming in early 2013. But the number seems to have made a substantial uptick in recent months, zooming from the 45 percent low at the end of 2014 all the way back up to 61 percent in just a few short months.
In San Francisco, 94 percent of offers are facing competitive bidding, according to the brokerage company’s agents.
Now, you want to be competitive, of course, and you want to have a reasonable fraction of your offers accepted, or you’re just investing time into your Real Estate IRA but still only getting the returns on the cash in your account. Naturally, you’d much rather own real estate than sit on cash. So what can you do to have a better shot at getting your offers accepted?
- Offer something besides price. Many IRA owners don’t have to worry about financing: It’s a cash offer with no contingencies on the approval of financing. Eliminating the need for financing means you can offer the seller a faster closing which means they get the money in their pocket quickly. This gives a powerful advantage to the Real Estate IRA investor over the typical individual homeowner hoping to qualify for a conventional, FHA or VA mortgage. If you can, consider agreeing to go through with the purchase without financing. Remember, cash and Elvis are still king.
- Attach earnest money to the offer. Customs vary in different markets, but one San Diego agent recommended a 3 percent earnest money offer in his market – which is one of the most competitive in the country.
- Waive or shorten the inspection period. Buyers that are more focused on speed than on price will often jump at a contract that guarantees that the inspection period will be over in five or seven days rather than the customary ten may well get the nod over offers that don’t lock in until after the full ten days has run its course.
- Offer to buy the property “as is.” If you are willing to sign an ‘as is’ affidavit on the spot, that may go a long way to making other objections vanish. That removes a lot of uncertainty for sellers, and makes for a much ‘cleaner’ offer.
- Look for opportunities to buy the land, rather than the home. In some markets, the land is worth more than the home. You may want to bulldoze the existing home and put a different house on it. This is often the case in gentrifying areas or “McMansion” districts, where the older ranch style or other dated homes are being torn down and replaced with newer homes.
- Walk in with ‘proof of funds’ already in your pocket.
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American IRA, LLC is a leading national authority on Real Estate IRAs. If you are interested in learning more, visit us at www.americanIRA.com and download our exclusive Guide to Real Estate IRA investing. Alternatively, call us today at 866-7500-472(IRA).
We look forward to working with you.
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