Starting the house-hunting process is exciting, but it can also be daunting. Once you find the perfect home that would be perfect for your family, you are likely eager to make an offer.
Unfortunately, if the property is in high demand, you may find you have some competition. This is when a bidding war may ensue, according to Houzeo. Now is the time to take action – which means setting yourself up for success. Some tips to help you win the bidding war can be found here.
Get Pre-Approved for a Mortgage
Any savvy homebuyer will be prepared to buy. This means being pre-approved for a mortgage before looking at houses. With a pre-approval letter, it shows the agent and seller that you have the funds needed for the purchase, and they know how much you can afford. It also means you are a safe bet when it comes to closing. Acquiring pre-approval for a mortgage may give you the advantage necessary to have your offer accepted.
Make an All-Cash Offer
Seasoned real estate investors are well aware of how effective this “trick” is. It is also one that you can use as a homebuyer to benefit your bid. A cash offer will eliminate the need for things like an official appraisal or bank approval for the loan, which are contingencies that most homebuyers must include in the offer they make. Cash offers let the seller understand you are serious about the offer you make and that you are ready to buy – right then.
Increase Your Bid/Offer
Do you have any wiggle room in your budget? Can you increase your bid without putting a strain on your financial situation? If so, consider making a counteroffer. Keep in mind, though, that this increased offer will also increase your mortgage payments for the loan’s term. Be sure the counter offer you make is still within your set budget.
Add an Escalation Clause to Your Offer for the Home
The escalation clause will let the seller know how much you can raise your offer if any competing bid comes in. This sets a cut-off price you are unwilling to go past. While many experts do not recommend this since it will limit your ability to negotiate down the road, it will help you eliminate the potential of an ongoing bidding war when the market is extremely competitive.
Have a Flexible Closing Date
Ensuring you are flexible when it comes to your offer is almost as good as offering cash for the home or property. If you do not have to move by a certain date, you can provide your seller with additional time. In some situations, this is as attractive to sellers as higher offers for the house are. It may work for you if the other offers that come in have hard deadlines in place.
Increase Your Down Payment
If more bids come in and the bidding war heats up, but you cannot increase what you can pay, consider increasing the amount you put down in earnest money or your down payment. When you take this step, the seller will see you are serious, and the lender does not have to approve you for this higher amount. With this tactic, you can come out in front of some of the other interested homebuyers who are not as serious as you about the property.
Getting Ready to Win the Bidding War
If you really want a home or property, the last thing you want to deal with is a bidding war. Unfortunately, these can occur at any time. With the tips and information found here, you will be prepared for this situation and help ensure your offer stands out from the competition.