How Low is Too Low? Bidding Austin Real Estate

As an Austin Investor, home owner and Austin Area Realtor--I sometimes see the best and the worst of decision making concerning how to bid Austin Real Estate. The assumption that only a low-ball offer is a good offer is a perspective that lands many buyers in a place where they did not expect they would end up. Getting to the end of the home buying process and not being able to get the house that you want is a terrible feeling.

Some buyers go into the buying process with the perspective "If we get it--fine. If we don't--fine." That is a healthy perspective if the house is priced above market value and your bid is at market value. But what happens when you really want a house and the numbers say that the new listing price is at market value? What if the house is a real keeper? What if this is a property that you really would like to own? What do you do?

The temptation is to try to eek out another two or three percent on the deal. Bid it below the listing price and expect a counter offer or possibly an acceptance--if you are lucky. And this approach can be both useful and valid--if you are bidding alone. No one on the horizon but you. No potential prospects. But here is where the rub causes problems. Inventory in Austin is low. Buyer activity is high for such low inventory. Buyers and Investors are both out looking at houses every day right now in Austin. For every home that you see and liked today, there are probably two or three other buyers who are also looking at it or maybe they saw it last night and they are signing offers right now while you are considering how low you can possibly get the deal down. I see this play out every day.

Here is the part where I will confess my short-comings. During the past quarter I have lost more than 4 major deals with clients and personal investment opportunities. Big dollars. Way more lost bids than I have seen during the past 2-3 years. Why? Because I bid too low, or I was not able to paint a vivid enough picture for my clients of just how aggressive buyers are acting right now--and they bid too low for this current market. Buyers are buying homes and buyers are paying for them. Yes, there are still some low priced communities where you can buy a house at a bargain price, but you will pay market value for that community. Market value in most communities in Austin is going up now (over the past 2 years)--not down. It's about risk and reward--just like the stock market. The smaller the risk of the community, the more robust and solid the comps. The higher the risk of the community, the more bargains you may find laying on the ground. As they say "You get what you pay for...".

So, how low can you bid? Here is my rule of common real estate logic: If you were the seller--would you sell? Would you take a loss? Is inventory low and buyer activity high in the area? Are others looking at the house now? If you put yourself in the seller's shoes, would you take an offer below market value on a house that shows well, is getting good showing activity and getting calls of interest or potential offers? If your "Seller's Shoes" tell you that you probably would not consider your offer, your "Buyer's Shoes" should probably reconsider your offer price. That's how low you should go.

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