After all this searching you’ve finally done it! You single-handedly found the perfect home with enough room for the kids, a pool out back, and even those calacatta marble countertops you wanted! However, your ever-informed Seven Gables Real Estate agent is concerned. A bidding war is a hallmark of a seller’s market like this one, and several other buyers (who probably didn’t even notice the calacatta) are likely to be interested in the property you’ve fallen for. Knowing what to do in a real estate bidding war can help you create an offer that sellers will jump to accept, even when the market is competitive.
Prepare! Come Pre-Approved
Consulting with a lender, such as our talented partners at Primco Mortgage, and getting a mortgage approval letter ahead of time gives you insight into what you can truly afford and what a monthly payment will look like. Furthermore, it gives your seller security in knowing this sale is unlikely to fall out of escrow or take a long time to get loan approval. This sense of security and showcase of your proactive attitude could be the key to securing the perfect home.
Start with Your Highest Offer… or Something Close
Throwing the highest offer you can on the table is a good way to ensure you either win the war, or know for certain you were never going to. However, you do risk over-paying with this technique. Market research from both you and your real estate agent can help you two determine what prices houses in the area are selling for. Offering something in that ballpark can definitely get you in the game, and paired with something like an escalation clause (offering to outbid any other offers by $1,000 up to [insert budgetary restriction here]) can often get you the home of your dreams without breaking the bank. Traditionally in a bidding war, the highest offer wins, but that doesn’t mean you can’t find the highest offer by playing smart!
Consider Cutting the Contingencies
In addition to wanting the most money possible, sellers want to make sure they can close a sale and close it quickly. One way to make this easier on a seller is to waive your contingencies, or the conditions that must be met before the sale is official. This can include things like dropping the appraisal contingency (an agreement that states that the home’s value must meet or exceed your loan amount) and paying upfront any extra cost on the home that your loan doesn’t cover. You might also opt out of things like inspections, or reviewing the home’s title report.
Letting go of these conditions can be risky, so proceed with caution! For example, if you’re going with out an inspection then do a thorough walkthrough before signing on any dotted lines. Or if you’re opting out of the financing contingency, then make sure you’re banking with finances you trust to come through and that you have second and third options lined up. Do your research on what letting go of these things mean before signing on to a contingent-free agreement willy nilly.
Seal the Deal
There are a few more things you can do to shorten your escrow period (and therefore please your seller). Being flexible on the closing date and possession gives the seller options in setting up their next living arrangement that others offering more money than you might have failed to consider. You could also propose things like a free leaseback term, a short option period, and a full cash payment on the property if you’ve got a million spare dollars lying around. Finally, make yourself stand out with a personal letter on why you absolutely need this home, and make sure to leave your contact info so they can get to you quickly about any changes or questions.
Hopefully these tips of getting pre-approved, offering as much as you can, waiving whatever contingencies you’re comfortable with, and making the sale quick and convenient for the seller can get you one step closer to that calacatta kitchen dream home you’ve been pining over. We wish you the best and happy bidding!