Winning the Bidding War
It’s the home-buying situation that every prospective homeowner dreads. You’ve found your dream house. You can picture how you’ll decorate it. All you have to do is make an offer and close the financing. But lo and behold, someone else wants the same house. And worse, they’ve offered more money! The real estate bidding war has begun. Here’s how to win every time.
Putting an offer on a home can be exhilarating, especially if the offer you submit is exactly what the seller has asked for. When you reach this stage, chances are you’ve already started to fall in love with the home and are picturing yourself living there. After all, you’ve met the seller’s asking price; there’s no reason the property won’t become yours, right?
Unfortunately, another potential buyer may have made an offer similar to—or even higher than—yours. Often times, rather than giving up on your dream home, you may decide to change your offer; making the terms more desirable to the seller and perhaps even raising your price.
This is the start of a bidding war.
Luckily, it isn’t always the highest offer that’s accepted. Using a few ‘tricks of the trade,’ you can make your offer stand out as the most appealing to the seller.
Meet the homeowners. Your offer may be accepted if the owners identify with you, or feel you’d be a good match to the neighborhood. If it’s not possible to meet the owners in person, write a letter introducing yourself and attach it to your offer.
Give the Seller Time.
The date of buyer possession is often an important part of the offer. The seller may need to coordinate selling, buying another home, and moving in a short amount of time. Offer the seller two to three days to move out after closing, without asking for compensation.
Up Your Earnest Money.
Earnest money, the deposit you put down on the home if your offer is accepted, shows the buyer you’re serious. Although it can be tough to shell out thousands of dollars before you even know if the deal will close, if a seller has two competing offers to choose from, she may feel more secure going with the offer that includes a larger deposit.
Sellers are often nervous that a buyer won’t be able to get financing, which is why some sellers will accept a cash offer for less than an offer that requires financing. Even if you have squeaky-clean credit, it can be hard to compete with a cash buyer. But you can improve your odds with mortgage pre-approval; it shows sellers that a bank has taken the first step will give you a mortgage.
Make sure you contact our lender partner to get pre-approved.
Ask your REALTOR to prepare multiple contracts, with different purchase offers. Your REALTOR can submit these whenever needed to stay on top of the bidding war. Make your offer capture attention by offering odd numbers, such as $449,999, rather than $450,000.
Dealing with Counter Offers
Even the best offers may be ‘countered’ by the seller. A counter offer means the seller would like to accept your offer, but is requesting specific changes. For example, you may offer to purchase the home for $400,000 with a 20 percent down payment; stating that the seller must pay for the repair of termite damage prior to the close of escrow. The seller may counter offer stating that he will accept the sale for $400,000 and a 20 percent down payment, but will not pay to repair termite damage.
At this point, you may choose to accept the counter offer, to back out and search for another home, or to counter the counter offer. Counter offers are considered new contracts, not a revision of the original offer, so be sure to read the contract carefully.
It can be easy to get swept up in the emotion of a bidding war; not only because you love the house, but also because it feels great to win! Yet, it’s important to remember that it’s just a house and there are other houses available.
Always, always, always know the maximum amount of how much house you can afford (and how much you’re comfortable spending) and stick to it. Don’t make the mistake of paying too much; causing financial difficulties for years to come.
Shawn & Kyle Cunningham
Cunningham Group at RE/MAX Advantage
Source: Money Under 30