A nationwide real estate franchise firm recently claimed that nearly 60% of their transactions involved multiple offers.
Unlike the bidding wars of the past, these aren’t all deep-pocketed investors who are submitting the winning bids. A buyers’ real estate agent in Virginia related a story about her client who was paying cash for a home.
Since cash offers typically win, imagine that buyer’s surprise when the home went to another buyer who offered almost twice the listing price for the home. In all, the home received 129 offers, according to a story at prnewswire.com.
Although being able to come in over the price others are offering is one way to win a bidding war (and the technique we offer up first, below), keep in mind that there is more to a real estate purchase agreement than price.
This spring’s hot sellers’ market requires an arsenal of techniques and strategies if you’re going to win a bidding war on the home you’ve fallen in love with.
Ensure you win the bidding war
The best way to enter a housing markets that are experiencing the bidding war process on homes for sale, is to go into the battle with a clear strategy.
Because you may need to make an offer higher than the listing price, plan to shop only for homes priced less than your loan pre-approval amount.
This gives you wiggle room with your money. Hopefully, enough to win the bidding war of others who came in at the top of their loan amount range.
Dazzle them with cash to win the bidding war
Fortunate are the homebuyers in today’s market who have the means to pay cash for a home, or have in-hand a pre-approval which allows them to bid high and win the bidding war.
Buyers who pay cash for a home, present a contract with fewer contingencies, and often win the bidding war. Since there is no loan involved in the purchase, they also have the ability to waive the appraisal—an attractive feature to sellers that often win the bidding war.
If you aren’t among these cash-laden homebuyers, read on.
Tweak the contract contingencies to win the bidding war
The news is full of stories about homebuyers trying to win the bidding war by willingly waiving the home inspection (just one contingency in the typical purchase agreement). It’s a risky move and one to consider at length before faced with the decision.
There are other ways to treat contingencies and ultimately win the bidding war, that may be attractive to the homeowner:
- Have the home inspected, but let the sellers know in the contract that their responsibility for problems will be limited to structural issues only.
- Shorten the time allowed in the contract for your contingencies. If the contract states you have 7 days to have the home inspected, offer to have it done in 3.
- A fast-moving market with rapidly escalating home prices puts home sellers on edge when it comes to the appraisal. Homes are selling so quickly, it’s hard to keep up and the appraisal may come in lower than the listing price. To ease the home seller’s anxiety and win the bidding war, consider adding an addendum to the contract that you will pay a certain amount more than the appraised value (if you’re budget allows).
“The best offer is a clean offer,” is an old real estate saying and it is never truer than in a sellers’ market. Whatever you can comfortably waive in the purchase contract do “clean up” the offer, do it.
Choose your team carefully to win the bidding war
You aren’t alone in this process—at least you shouldn’t be. When choosing your homebuying team (agent and lender), choose carefully. In this lightning-quick market, responsiveness is a quality worth its weight in gold.
You’ll need a team that not only responds to your communications, but to one another as well as the listing agent. Nobody should have to guess at where the others are in the process.
I am applying for the job to be on your team and help you win that bidding war. I have been very successful in winning the biding war for my clients in this current market. Feel free to reach out to learn just how responsive I am and how I can best represent you.