Posted by Christine Owens on July 13, 2017
What You Need to Know About Home Bidding Wars
It is no secret that it is a seller’s market right now. What that means is that the seller has the upper hand because home inventory is low and home buyers are eager (read: willing to pay more) to close the deal. If you have found a home that has multiple offers on it, it may come down to a bidding war which can be stressful and expensive. Buyers can get caught up in the bidding war atmosphere and confused about what they really want in a home. But, it does not have to be that way! Buyers need to be informed about home bidding wars and what they need to do to make the best financial decision when buying a home.
First thing is first – you should not waste your time trying to win a bidding war if you have not yet been pre-approved for a mortgage. Get pre-approved first so that you know what exactly you can afford and to show sellers that you are capable of getting the mortgage you need to buy their home. If a home has multiple offers on it, it is not the time to submit a low-ball offer. Know what you are pre-approved for and determine what you feel comfortable spending. Armed with that knowledge, submit a solid offer that is reasonable for the home and that you know you can pay. Another way to entice a seller to accept your bid is to offer to waive the contingency. Many buyers submit an offer that is contingent on securing financing to close on the home. If you offer to waive the contingency and ultimately cannot secure financing you may lose your deposit so consult your lender, realtor, and a lawyer before offering to waive contingency. Additionally, it can be beneficial to submit a personal letter with your offer that explains your reasons for wanting to purchase the home. Perhaps you want to raise your family in the home and the seller is a recent empty-nester. It may just pull on their heartstrings enough to accept your offer.
In many bidding war situations, cash is the ultimate king. The higher your down payment or bringing a cash offer to the table can make your offer far more appealing to the seller. Additionally, consider offering substantial earnest money to help entice the seller. It can be easy to get caught up in a bidding war and lose sight of your ultimate financial and homeownership goals. Set a max amount and don’t exceed it so that you can be confident in and comfortable with your purchase. Finally, working with an experienced realtor and mortgage lender can help you win a bidding war because your realtor can guide you and your lender can help you close on your new home as quickly as possible.