Have you ever lost what you considered to be the perfect home to another buyer in a bidding war?
If yes, you probably understand the feeling of disappointment that comes with it and want to prevent a recurrence. However, if your answer is no, then you may be looking for a way to avoid such heartbreak in your home buying quest.
Regardless of what your situation is, we’ve got you covered.
While there is no guaranteed strategy to win a bidding war, successful buyers do certain things that put them ahead of their competitors. In this article, we explain what they do and how they go about it.
Smart Tips to Improve Your Odds in a Bidding War
1. Know your financial capability
A bidding war is like an auction. Before you get into it, you must be sure of your financial capability.
Not knowing how much you have at hand before making an offer on any house can be disastrous. It will lead to a waste of everyone’s time, cost you the house, and even money (e.g., earnest deposit money).
So, draw out a budget before you start shopping for a house. More importantly, stick to this budget even when you find yourself in a bidding war for your dream house. You don’t want to end up losing the house to foreclosure in the future.
2. Get a mortgage pre-approval letter
Nothing excites sellers more than a buyer who has their finances sorted out. Hence, before making an offer for the house, get a mortgage pre-approval letter from your lender.
The pre-approval letter your lender gives you will prove to the seller that you are a serious buyer. And that automatically puts you ahead of buyers who haven’t solved their financial issues.
One smart tip to follow when getting a pre-approval is to have your lender direct the letter to the specific property you are bidding for. Doing this will further assure the seller of your willingness to purchase their house.
3. Offer to pay in cash
Home sellers prefer cash buyers over Bank-supported buyers. The reason for this preference is because cash buyers have a higher chance of seeing the transaction through without unexpected problems that could cause the transaction to fall apart.
Additionally, dealing with cash buyers leads to a fast transaction process because there is no need to involve a third party (lenders).
Therefore, if you can afford to pay in cash, don’t hesitate to let the seller know. It will make the seller more interested in your offer.
4. Pay more money upfront
Let’s say you can’t afford to buy a house with cash; what do you do?
You can show commitment by putting down more upfront payments. For example, you can put up more than the required 20% down payment. Or better still, you may offer more earnest money and even non-refundable earnest money.
A large upfront deposit or non-refundable earnest money will grab any seller’s attention and set you apart from the competition. It also means you’ll require less money from the bank, which is perfect if the bidding war goes above what the house might appraise for.
5. Add only important contingencies
Contingencies are conditions that both parties must meet before a real estate transaction can go through.
However, most sellers see them as a potential block to completing the sales. For this reason, if you want to improve your chances of getting a home, you should consider removing some contingencies.
Now, keep in mind that contingencies are there to protect you. Therefore, only waive low-risk contingencies. For example, you shouldn’t waive a home inspection contingency because you don’t want to end up with a house that requires expensive repairs.
Also, to be on the safe side, work with your agent on what contingencies to waive.
6. Add escalation clause to your offer
An escalation clause is a common real estate contract condition buyers use to ensure they are the highest bidder. This clause indicates that you’re willing to increase your offer by a specific amount if another buyer matches it.
For example, if another buyer offers $300,000 and your escalation amount is 10,000, the escalation clause will increase your offer to $310,000.
Include an escalation clause in your offer to counteract any other bid for the house immediately. That way, you’ll be the highest bidder among competitors. However, remember not to go over your budget with your escalation clause. You can discuss this with your agent.
7. Personalize your offer
Personalized offers don’t sway many home buyers these days. But that doesn’t mean you should not try it.
The truth is that many sellers are still emotionally attached to their homes. So, if you do it right and sincerely, you may be able to convince them to sell to you.
Some of the smartest ways to personalize your offer include:
- Writing an offer letter
- Sending a gift
- Physically meeting and appealing to the seller
Note that personalized offers do not matter to a seller who wants the highest bid for their home. Therefore, before writing the letter, get to know the type of seller you are dealing with.
8. Hire a buyer’s agent
What better way to win a bidding war than hiring a professional buyer’s agent to help you handle it?
The best part is that you will get this help for free since buyers’ agents get their pays from listing agents’ commissions.
A professional buyer’s agent will know a thing or two about bidding war. They will be ready to help you get your dream home. In summary, having one on your team is the best way to win a bidding war.
There are chances that you might lose out in the bidding war even if you do everything right. But you should lose hope if that happens. Instead, you should keep an eye out for another property and be ready to act fast.
Where can I find a reliable buyer’s agent?
Finding a RELIABLE buyer’s agent is hard. Fortunately, you are on the website of one of the best agents you can find around you – Bost Redevelopment.
Our expert team of real estate agents will provide all the support you need throughout the house buying process. We will use our network and connections to help you find the house of your dream. Lastly, we will negotiate with the seller to make sure you get a favorable deal.
Want to talk more about your options? Please leave us a message below with your contact information and let us know how we can help you.