How Buyers can Compete Against Investors

Real estate investors are currently attracted to less expensive cities with little competition.  Specifically, investors are looking for cities where the medium home price is at or below $195,000. You can find out which cities meet this criteria at Realtor.com’s Trends page. A foreclosure to for-sale listings ratio of 1:1 or higher is also a good metric to evaluate potential areas to invest in property: areas with this ratio or higher are likely to attract investors. This information can be found on RealtyTrac.com’s Stats & Trends page.

If you’re interested in buying a foreclosure as a residence and not an investment property, check out homepath.com using search terms “Fannie Mae foreclosures.” Buyers have priority over these listings for 20 days, at which point they become anyone's game. Buyers can also avoid competition with investors by purchasing new construction. Investors aren't looking for polished, updated homes; they are looking for deals--cheaper homes they can renovate and put back on the market for a much higher price. Of course, seeking a Realtor’s help can be of great use, given their experience. Some realtors even have “pocket listings” (those not entered into the MLS) that they share with clients. If you do find yourself competing with an investor for a property, be prepared to top the investor’s offer by at least 5%. This makes up for the fact that an investor’s all-cash offer will be more appealing. Going through underwriting before you house hunt shows sellers you are motivated. A final tactic is one that appeals to a seller’s emotions. Write to the seller(s) about why you want their home. Some people want their homes to be used for raising a family, for example, and would prefer selling to a family to a company. 

Sellers should consider this point as well. They will likely get a better price for their home if it is sold as a residence, as buyers often have more incentive to negotiate (they are willing to fight for their dream home).  However, this process will take longer and cash payment is unusual.