Ok, so you found a house in Springfield or Burke that you really want. You’re ready to put in an offer, but you’ve found out that others want it, too. Maybe even a LOT of others. Sometimes when a property is in high demand, buyers have to do a little extra to make sure their offer stands out from the competition. But if there are multiple buyers vying for the same property and everyone is going above and beyond to gain the advantage, this could lead to what is called a bidding war.
Should you give up and settle for another place? Not so fast! There are several strategies to win a bidding war on a house you really want.
How To Win A Bidding War
1. The first strategy is obvious: increase your offer. Everyone wants to get the very best price for their property, so the best bet for winning a bidding war on a house is offering more than any other buyer. This doesn’t mean you have to pay an outrageous amount more; sometimes adding just a few thousand dollars can mean the difference between winning that dream home or losing it.
2. It may also be helpful to increase the amount you are willing to put as a down payment. Not only is the down payment seen as a commitment – and sellers like to see serious commitment – but a higher down payment means less money will be required from the bank for a mortgage. This is important if the bidding war pushes the price above its appraisal value.
3. If you’re unable to afford a higher down payment, you may think about simply increasing your earnest money amount. Earnest money applied to the down payment is another good way to show how serious a buyer is in buying a home. Since earnest money is applied to the down payment, putting the most a seller can afford upfront shows good faith and may win a bidding war while doing no harm to the buyer.
4. Paying in cash, when possible, is also a strong strategy. Cash offers negate the need for bank financing, which reduces the number of obstacles on the road to closing and also tends to take a lot less time. Sellers hate hassle, so this is a good one, though not an option that applies to everyone.
5. Be ready with a pre-approval. Sellers don’t want to waste their time with buyers who can’t see the contract through to closing. With a pre-approval from your lender in hand, you’re showing that you’ll be able to borrow enough money to purchase the property. Sellers like a sure thing, so providing a pre-approval specific to the property in question is that much more promising.
6. Consider waiving contingencies. Contingencies are the circumstances that must be met in order to close a deal on a property. These contingencies may relate to loans, appraisals, or any of a variety of clauses related to home inspections. If they are not met, the buyer can back out of the deal without forfeiting their earnest money. But if you deem the risk worth it and waive your contingencies, you’ll be showing just how badly you want to make a deal. Sellers are motivated to move forward with offers that are likely to have fewer hiccups.
7. Include an escalation clause. While these clauses can get complicated, an escalation clause basically is an accompaniment to your offer that authorizes your agent to raise your offer by a specific amount or percentage whenever another bid is made, up to a predetermined limit. This is a bidding war strategy that truly shows how seriously interested you are in a property and how far you are willing to go to win it.
8. Make a personal connection. It never hurts to appeal to the seller’s humanity. Previously, it was common for agents to suggest penning a personal letter in an attempt to elicit an emotional response or connection from the seller. But in 2020, these letters are becoming all too common, and are usually overlooked. Sellers are looking for the best buyer and a strong monetary offer, not a story that tugs at their heartstrings. Still, some non-monetary personal connection tactics do work. For example, put yourself in the seller’s shoes and consider how you might be able to provide convenience or peace of mind. For instance, if they are older and not wanting to clean out their home and deal with their lifetime of belongings, a buyer could consider suggesting that to make the transition easier, the sellers would not need to empty the house. Little things that make big headaches go away can make a huge difference!
You need a good game plan to win a bidding war on a house you love. Elizabeth can guide you through each step of the process so that you know you are making the right decision at the right time. Good luck!