Image by Amy Hirschi from Unsplash
Situations arise where prospective buyers find themselves in a bidding war with another buyer over the house they desire. Circumstances like this occur in a seller’s market where the demand for property is higher than the market can provide (which we are currently in). It’s not uncommon to see multiple buyers vying over the same property in a seller’s market. In these cases, buyers often attempt to best their competitors by submitting ever-increasing offers. To help you win a bidding war, you need to stand out from other buyers. Consider the following methods that may boost your chances of securing the home you desire.
Up your offer
In a bidding war, the person with the highest bid ends up with the home. If you want to increase your chances of becoming the owner of a house when you have competitors, offer more money for the home. You do not have to go overboard when increasing your offer; a few hundred dollars more may make a difference. In this case, follow the guidance of an agent experienced in negotiating bidding war situations. Most scenarios do not warrant just throwing excessive amounts of money at it. In the past I have helped people navigate when it is worth spending more and when it is worth walking away from a property.
Be ready to show your pre-approval
OK, so you do not want to just throw money at the situation... To give yourself a winning edge during a bidding war, show the seller you are a serious buyer and that you are prepared to see the transaction through to the end. Sellers pay more attention to buyers that come prepared and ready to finalize the contract. A pre-approval letter from your lender can give you that edge. Further it is important to choose a lender that is quick to respond to questions that the listing agent may have. Choosing the right lender could lead to you getting accepted over someone who is offering more money with the wrong lender.
Waive your contingencies
A contingency is asking the seller to make a concession on your behalf. Examples include closing delay contingencies based on your current home selling or your receiving proceeds from probate of a will. Other contingencies might be asking the seller to repair a roof or broken window before the close of the agreement. If you decide to waive your contingencies during a bidding war, it speaks volumes to the seller of how badly you wish to proceed with the transaction. You want to be careful though when waiving contingencies so that you do not end up in a situation where you lose your earnest money – be sure it’s a risk worth taking. Speak with a knowledgeable real estate agent to discuss the pros and cons of the various tactics you can take while filling out the contract.
Pay in cash
Offering to make payments for the house in cash gives you a chance over other competitors. It’s not an option everyone can afford, but if you can pay cash rather than getting financing, put the offer on the table. If you are offering to pay cash for a property you are in a bidding war to purchase, it eliminates third parties, reduces closing time, and makes the seller understand that you are serious.
Include an escalation clause
An escalation clause is an addendum included in your offer telling the buyer that you are willing to increase your purchase offer by a certain amount if another buyer is matching your offer. An escalation clause comes in handy when you are trying to win a closely fought bidding war.
To win a bidding war over a home you like, you must be strategic and ready to go the extra mile. Make sure your real estate agent knows your maximum budget to negotiate for you appropriately.
If you are interested in learning about more of the ways that you can get into a home as the Spring housing market heats up, I would love to take you out to coffee to discuss some of the approaches we can take!
