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Q & A with America's real estate professor: Investors taking all properties

Zillow • Mar 12, 2013 at 4:07 PM

Investors Taking All Properties

Q. My wife and I keep making offers on properties, but we are losing out to investors who are paying all cash. I know it’s a free market and there isn’t much I can do, but any guidance on how to win this “bidding war” for a home? Ricardo, M. Harrisburg, PA

A. You’re not the only one! Yes, there are many investors buying properties and that makes it tough for owner-occupant buyers. The most important thing is to take your time and don’t rush to buy a property that isn’t a great fit for you and your wife. If you have to wait a long time, that’s better than buying a property you don’t really want, and selling it in a few years and losing money.

So, always put your best foot forward on offers, this includes a nice cover letter detailing why you love the property, proof of funds to close escrow, and a pre-qualification letter (or pre-approval) with the offers. Also, have your agent call the listing agent directly to plead your case and try to present your offer in person to the seller if you think that will help.

And, know the market, so if something comes up that you love, you can pounce on it. Lastly, if it’s a great property, you can always offer a little more. Paying more won’t be an issue 7, 10 15 years down the road when you have earned all that equity that we all so desire with real estate ownership. Good luck!

Properties in Flood Plains

Q. We’ve seen all the issues with Hurricane Sandy and houses being washed away. Seems like there is a lot of news about the insurance companies not covering the costs to rebuild people’s homes. This makes me concerned about buying a home on the shore. What’s your opinion. Rodney S., Passaic, NJ.

A. You should be concerned. Flood insurance usually only covers $250,000 of house and $100,000 of personal property. If you lose more than that, it’s upon you to cover the rest. Houses near the water will always have this risk, and it may get worse over time. And while flood insurance may be reasonably priced today, there is no guarantee on the cost in the future. If coverage stops in future years, you’ll be 100% at risk on your property.

So, be cautious of buying real estate near the shore. From a long-term perspective, at some point you’ll probably have to deal with a major flood issue and it will probably cost you a lot. So just think that through when you are making your property purchase. Good luck!

EDITOR'S NOTE: This story was written by Leonard Baron, an MBA who is America’s Real Estate Professor®. His unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University Lecturer, blogs at Zillow.com, and loves kicking the tires of a good piece of dirt! Email Your Questions to: Leonard@ProfessorBaron.com


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