It’s great to see the housing market recover from a big letdown and enjoying the hot new market. But, with the recovery comes a tight supply of homes, multiple offers – and bidding wars.
Knowing a few tricks of the real estate trade can help you emerge with the best bid and be the winner in a bidding war. For one, you should try to be the first offer – but don’t insult the seller with a lowball offer – especially with so few listings on the market today.
Bid at the asking price or only slightly below. The seller will know you’re a serious bidder with that type of beginning. One trick of the trade that really works is to add an escalation clause to the bid.
For example, if the price of the home is $500,000 and you think it might rise as high as to $550,000, add a clause that says you will go as high as $560,000 (if that’s true and you really want the home).
The clause should state that the seller can only raise the winning bid to just above the competing offers. For example, if the bids on the home only go as high as $530,000 you won’t be expected to pay $560,000 but only slightly above the highest bidder.
Another little known way to make your bid count is to send the seller a letter (possibly through your real estate agent). Tell the seller how much you love the home and mention something about the home that you particularly like and how your family will enjoy and take care of the home.
Plan to spend as much cash as you on the down payment and be sure to get approved for a loan ahead of time to close. Mortgage lenders suspect loans that aren’t a sure thing and bringing cash to the table makes a difference.
Go in armed with a pre-inspection. The few hundred dollars it will cost is well worth the time and money. And the seller will know that you’re serious about wanting the home. Have the pre-inspection performed before making an offer on the house.
Your real estate agent can be a huge asset in a bidding war. She can let the seller know that you’re completely enamored with the house and be specific about what you like about it. Chances are, the seller will appreciate that you noticed the touches he was responsible for.
Finally, be smart during a bidding war. Compare the most recent comps and research the market before getting in to a bidding war and don’t let your emotional attachment to the house empty your wallet.
It’s easy to overpay when you get caught up in the emotions of a bidding war, but remember there’s always another house that you’ll love and enjoy. Too many buyers get caught up in the emotional aspect of purchasing a home and go overboard in a bidding war. Most regret it later on.