Today’s housing market is very different from what we had a year ago. Back then, people could make cheap offers and had a good chance of being accepted. Now buying a property has gotten more expensive and complicated, and there are reports of bidding wars across the country even as we enter the slower selling season.
There is more to winning a bidding war than crushing other investors with your bank account until the home seller gives in to your offer. When buying a property, be it a home that you will live in or one that you are buying as an investment, it is best to do your research, set boundaries, and be strategic. Armed with knowledge, you are more likely to be the winner in your battle to buy a property without paying more than you should.
The following 11 strategies can help your bid stand out and win a bidding war.
1. Build relationships in advance
Building relationships with real estate agents and real estate agents can go a long way. You don’t always have to have the highest offer to win, but you do need the offer that the agent likes best. That often depends on your confidence in the deal and making sure the broker gets their commission quickly. If they know you and know you qualify, you will be way ahead of the game.
As a buyer, you should choose an experienced, local, well-known agent. The more respected the buyer or agent is within the community, the greater the chances that they can successfully woo the agent. While you’re at it, you can also enjoy listing agents because they’re the only people who meet all of the parties involved in a sale. In a competitive situation, the agent will be more comfortable working with a well-known agent and meeting with the agent in person, which increases your chances of winning, especially when two offers are very close together.
2. Know the neighborhood
Make sure that your expectations do not deviate from your abilities. Some neighborhoods are more expensive. Some have more (or less) popular housing styles and all have different types of amenities nearby. There are many real estate price comparison websites in each community. Research can help you avoid neighborhoods outside of your price range or find the right locations for you. Use these websites to narrow down the places where you want to buy a property.
3. Make strong offers
It’s important to stand out in a bidding war. If you don’t want to pay more, submit higher serious cash deposits so the seller knows how serious you are. A higher deposit on the fixed-term deposit could also show the seller that you are financially stable and therefore less likely to fail the transaction.
Remember, however, that serious money is not always refundable, especially if you do not close the property. When filing a higher deposit, be aware and understand the contingencies that you are agreeing to.
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4. Write a personal letter
You could write a letter accompanying your offer. Adding your story to your listing can help the seller feel an emotional connection with you. Not only will you stand out in a bidding war, but the seller may also be more inclined to be flexible with you.
That being said, not choosing you can also affect a seller. While this is rare, there are a few things to consider when writing a letter with your offer. Focus on what the house can do for you without forgetting what the house already means to the owner. This could be the home they raised their children in or where they have lived for years. If you write too much about yourself in your letter, the seller may consider other offers.
4. Add an escalation clause
Another way to create a strong offer is to agree from the start to increase your offer when another buyer has made a higher bid. You can do this by writing in the contract that you are offering, for example, $ 1,000 or $ 5,000 more than the highest bid made.
With this method, make sure you put a cap on the total amount you are willing to pay, or you can easily exceed what you want to spend. Pick the point where you will be leaving the property and then stick to it. Getting involved in a bidding war can be exciting, but don’t let the thrill get you too much money.
5. Drop contingencies
You might be tempted to add contingency to your offering, especially if the property market is moving fast or you are concerned that something will be overlooked in the transaction. The eventualities include:
- Home inspection
- House sale
However, sellers prefer offers without contingencies. Dropping contingencies reassures the seller that nothing more will show up at the last minute. It can give sellers more confidence in your offer compared to others who have received them that involve contingencies.
6. Offer all cash
Knowing that speed is the key to winning a bidding war, be prepared to pay in cash if possible. No matter how high the down payment, processing and mortgage approval may be, from accepting the offer to handing over the keys, it can take a long time.
When you come to the table with cash, you have an edge over the competition. Sellers love cash offers because they are more reliable and are less likely to fail at the last minute. However, not all buyers or investors can make cash transactions.
7. Be pre-approved
If you are unable to do cash transactions, get your loan pre-approved and offer as much cash as makes sense for your financial situation. Mortgage pre-approval letter offers can add peace of mind to the seller as the first step in securing funding has already been completed.
Pre-approvals also help you, the buyer, by letting you know
- How Much Is a Lender Ready to Offer You?
- What will the monthly mortgage payment be?
- What mortgage options are available to you
A lender will check your creditworthiness, professional history, identity, bank statements, current debts, and completed mortgage application before they can pre-approve you. When they get pre-approved they are given a certain amount of credit they want to lend you that you can submit with your offer.
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8. Act quickly
As mentioned in # 6, speed is a big part of the equation to winning a bidding war. The internet has sped up the sale of homes significantly, with some homes being sold the same day they came on the market from that seller. When a desired property becomes vacant, don’t wait for the open house and forget about cheap deals. Take a look at the property so you can do your valuation and get your best offer right away. You can only get one sticking point here, so have all of your paperwork in advance. When the right property hits the market, you can get hold of it.
9. Be flexible
Expressing your willingness to work with the seller’s schedule and requirements can go a long way in making a successful purchase. If the seller wants to stay in the apartment for a while after it has been closed, you can offer a “lease-back” or “rent-back”, which means that you will be his temporary landlord until you move out. When you bid on a short sale, you are making it clear to the seller that you are ready to wait for the bank to decide, no matter how long it takes.
10. Buy as is
Be the no-hassle buyer to work with. If you throw in warning signs that you will be difficult throughout the process, most sellers and agents will shrink back, no matter the size of your listing. Instead, evaluate your offer as it is and draw up a simplified contract. Many sellers take a lower purchase price in exchange for a straightforward transaction that is completed on time. As an added benefit, the same agents or salespeople may select you again one day. The better your reputation, the more access you will get and the better prices you will get.
11. Keep trying
Don’t be intimidated by higher bidders; If you really want the property and think you can get it working, push forward. Make the offers and bids that you are satisfied with and make a note of your “Walkaway Number”. Bidding battles can get emotional quickly, so it’s important to set your financial limits and remember them.
If you lose the bid, offer to be a backup in case the accepted deal fails. Remember, not every opportunity goes your way and it is better to have bid and lost than to have outbid and paid too much.
If someone else closes on the property, find one to bid on. Buying a property in a sought-after market can mean submitting a few bids before finalizing your new property.
Bidding wars have become more common for lower-priced properties, but now no property is safe. Despite all of this information, winning a bidding war also requires some luck. As mentioned earlier, use winning strategies and don’t get so bogged down that you end up buying a property for more than your maximum price. Do your research, know your limits, and pay attention to local property market values. Equipped with the right knowledge can give you an edge over the competition and allow you to outsmart them without outbidding.