It happens to the best of us: we’ve located the ideal property, only to be outbid. Customers typically have to go above and above in seller’s marketplaces when demand is high and inventory is limited to stand out from the competitors.
Multiple purchasers competing for the same property might lead to a bidding war, in which both sides strive to sweeten the transaction just enough to outbid the other. So, how to win a bidding war on a house? Below we cover your best tactics.
Why Bidding Wars Happen
Bidding wars happen when two or more buyers are interested in the same property and are willing to outbid each other to purchase it. This often happens when the property is in high demand and not many other homes are available for sale. The buyers may compete by increasing their bids, offering additional money for closing costs or repairs, or waiving certain contingencies.
If you want to know how to win a bidding war on a property, there are certain things you should do to increase your chances of success. Here are the top eight:
1. Increase the Value of Your Offer
When it comes to money, everyone listens. Offering a higher price than the competition is the best way to win a bidding war for a home.
It’s crucial to remember that just because you’re willing to spend more on a home doesn’t imply the bank is. Still, you’ll only secure financing for as much as your property appraises for. As a result, if your higher offer is approved, you may have to pay the difference yourself.
2. Be Prepared To Demonstrate Your Pre-Approval
Most sellers seek purchasers that are willing to stick with a deal until the conclusion. A pre-approval letter from your lender confirming that you will borrow the necessary funds to buy the property is an excellent way to demonstrate your dedication to the transaction.
A letter from your lender stating that they have pre-approved you for a loan should be particular to the property you’re interested in purchasing. You’ll have a better chance of winning a bidding battle on a property if you are an interested party and you’re prepared to show the seller your pre-approval.
3. Don’t Be Afraid To Put Down More Money As Down Payment
If you’re competing with other buyers, increasing your down payment commitment could win the war. If a bidding battle pushes the price above what the property would appraise for, a greater down payment implies less money will be required from the bank.
It’s a good idea to bring in documentation that proves you’re not just willing to do more, but also have the resources to do so. You should also add a verbal guarantee.
4. Consider Eliminating Your Contingencies
To conclude a real estate deal, several conditions must be satisfied. The buyer has the right to cancel the order if the conditions aren’t satisfied. When you waive your contingencies, such as an inspection, you signal that you’re willing to move through with the deal.
When bidding is fierce, you might gain an advantage by eliminating as many contingencies as possible. Your bid may rise to the top of the list as most sellers prefer the fewest possible hurdles. The downside to this strategy is that you may end up with a defective property and lose a lot of money in the process.
5. Pay With Cash
Of course, this isn’t an option for everyone, but if you have the money to pay for the item outright rather than obtaining financing, consider doing so. You’re not only cutting out a middleman, but you’re also sending a message to the seller that you’re serious about the transaction. Once the lender has been removed from the equation, the danger of a bank delaying the payment (preapproved or not) has been removed as well.
That being said, relatively few purchasers can afford to purchase a home entirely in cash.
6. A Clause for an Escalation Should Be Included
When you submit an offer, you may include an “escalation clause,” which specifies that if another bidder matches your offer, you’re prepared to increase your offer by a certain amount.
A buyer may argue that escalation clauses are a bad idea because they reveal your interest in the property to the seller in a way you might not want to do. But if you want to win a bidding battle on a property, it’s fine to put everything on the table and let the seller know that you’re serious. In any case, the escalation clause should be tailored to meet your plan and your budget.
7. Get To Know Each Other Better
A personal touch to your offer can never hurt, even though money is ultimately what makes the difference in a real estate deal. Send a letter to the owner expressing your admiration for the property. Include why you think you’re the appropriate buyer for their house and why you feel so passionately about it. This strategy may have a favorable effect on those with a deep personal connection to the property.
8. Hire an Experienced Real Estate Agent
Seasoned real estate agents have the experience and expertise to teach you how to win a bidding war on a house. In addition, they are well-versed in the local real estate market, which is critical in assessing the home’s true market worth.
During a bidding war, it is not uncommon for buyers to get so competitive that they make unsafe financial judgments. You may be assured that if you work with a real estate agent, you won’t overpay for a property, regardless of its actual value.
Wondering how to win a bidding war on a house? You need to be prepared to make a competitive offer and have access to all the information possible. Stay calm and focused, and remember that the most important thing is finding the right home for you and your family.
Agents’ commissions are often deducted from the home’s purchase price. So, purchasers may be getting free representation at times. However, the one thing that is increasingly difficult to get is an approved loan that gives you the money just when you need it.
The Associates Home Loan of Florida is the best place to acquire a home loan. We offer competitive interest rates and unparalleled customer service. Our loan officers are experts in the Florida housing market and are dedicated to finding you the best mortgage product for your needs. Contact us today to get started on your home buying journey!