How to win a bidding war
Bidding wars have become more and more common, which can discourage potential buyers. Fortunately, there are many ways to make your offer stand out among sellers and help you win a bidding war.
Get pre-approved for a mortgage
Mortgage pre-approval is one of the most important steps in the home buying process, whether or not you expect a bidding war. Get pre-approved for a mortgage is a signal to sellers that not only do you want to buy their home, but that you have the financing to do so.
Not only does pre-approval increase your chances of having your offer accepted, it can also help avoid problems down the road. Make sure your lender explains how they approach the pre-approval process and what that means in terms of the likelihood of your loan being fully approved when it’s time to close your new home.
Finally, pre-approval can also be beneficial for you as a buyer, as it gives you a better idea of ââhow much you can actually afford. The last thing you want is to bid on a house and find it is over budget.
Make a competitive offer
For your offer to be accepted by a seller, it must stand out from the crowd. Unfortunately, there is no way to know for sure what other bidders will be offering. When you are make your offer, consider bidding above the asking price in order to stay competitive. Keep in mind that many homes have sold well above asking price over the past year and a low bid is likely to be rejected.
This stage of the process is where a experienced real estate agent can be a huge asset. They can help assess the real estate market and determine if the home is priced right. Your agent can advise you on how much above the asking price to bid to stay competitive.
If you decide to bid above the asking price, just be mindful of your budget and make sure the amount you are bidding is still affordable for you.
Pay in cash
Buy a house with money is not possible for most potential buyers. But if you are in a position where you can pay cash, it is worth considering. Cash offers can be attractive to sellers, in part because they eliminate much of the wait that comes with approving a mortgage.
If you can’t afford to pay in cash, don’t worry. There are still ways to make your offer a little more lucrative, including offering a honest money deposit or a bigger one advance payment. Much like paying cash, these strategies can show the seller that you are a serious buyer.
Limit or waive the unforeseen
A contingency is an element of the housing contract that allows you to opt out or renegotiate due to certain factors. Many home auctions are contingent offers. These clauses often allow buyers to opt out if the home inspection reveals major issues, their own home doesn’t sell, or the appraisal doesn’t come back as expected.
One way to make your offer more attractive is to not include these contingencies. But make sure you know exactly what that means. For example, if you waive the possibility of an appraisal, you bring the difference between the appraised price and the agreed purchase amount to the closing cash table. If you have additional savings, this might be a way to give your deal a boost. Just be careful not to stretch your budget too much – you always need to find the advance payment and closing costs also.
You may also consider dropping the home inspection contingency. While you should always have an inspection done if you want to know what potential issues might arise with the home, you might consider not making the sale dependent on the inspection – a contingency that could lead sellers to pass on your offer if the others they are considering have given it up.
Remember, these contingencies protect you as a buyer. Removing them from your offer could result in considerable costs for you, which you should be aware of before making a clear offer.
Add an escalation clause
Another thing that can be useful in a competitive bidding situation is to insert an escalation clause. Suppose you make an offer for a house for $ 310,000. You then insert a provision into the offer that says you will go $ 1,000 on top of any offer up to $ 320,000. This way your bid doesn’t exceed your absolute best bid, but you don’t have to pay too much by putting the super high bid that no one is likely to match your first bid.
It also makes the seller happy. Even though they probably did their homework on the home’s value to decide the price, they’re still happy to get more than they advertised. The good news is that for the escalation clause to take effect, the seller will need to provide proof of the competing offer so that you know you are not paying more than you actually owe.
Be flexible on a closing date
Another way to make your offer more attractive to a seller is to be flexible on the Closing Date. Sellers can have a number of reasons for wanting to close on a particular date. A family with children might want to bring the closure forward so their children can start at their new school. On the other hand, they may want to postpone the closure to allow their children to finish the year at their current school.
Whatever the reason the seller wants a certain closing date, they’ll be more likely to accept an offer that offers the flexibility they need.