Despite the COVID-19 pandemic, the real estate market is continuing to heat up due to the low inventory and improved interest rates. Buyers are much less fearful after the initial lockdown and are looking for houses like they did before by wanting a walk through with an agent after looking at the home via a video chat tour.
So, if you have finally found the perfect dream home, multiple offers may have likely come in for the same home. In this scenario, you will need a plan to beat the competition.
Here are six strategies that can help you win a bidding war and come out on top to close the house you want.
1. Understand the Local Market
Be a smart homebuyer and do your research before submitting your first offer. Your realtor will provide the recent closed sales of the specific market you are looking for. However, you must search the online listings websites to find homes that are similar in size, condition, and location. You should also examine factors like how long they stay on the market, how much sellers are asking for, and the final sale prices. This will help you understand how competitive the market is and allow you to make the most compelling offer.
2. Get a Pre-Approval Letter From Your Lender
The essential weapon that can give you an edge over bidders financing their home with a mortgage is the pre-approval letter (do not confuse this with a pre-qualification letter). This not only gives you a clear picture of how much house you can afford but also lets the seller know that you are serious to close on the purchase. It will help your offer move on top of the pile of bidders who do not have an approval letter.
3. Include an Escalation Clause In Your Offer
If you are keen on making a higher offer on a home but are afraid of overpaying you can include an escalation clause. This is essentially a contract addendum that tells the seller that you are serious about buying the property. It also states that you are willing to raise your offer to a certain limit if a competing bid comes in that matches or tops your initial bid. This will strengthen your offer on a home and allows you to increase your bid.
However, when using an escalation clause do not get carried away but set a realistic cap for yourself. You should be sure that you can afford the top price and the home will be assessed for that price.
4. Write a Personal Letter
It may seem surprising but in a bidding war appealing to the seller’s emotions can tip the scales in your favor. For many people selling their homes can be a very emotional and difficult process. So, in a close bidding situation, a personal letter expressing your sincere feelings about why you love the house or why you want to make it your own can help you come on top. You can also tell the seller a little bit of yourself and include a photograph of you, your family, or even your pets.
You could even strike the right note by having a glimpse at their pictures, trophies, and souvenirs, etc. while touring the house.
If you are not good at writing letters you can request a family member or friend who is a proficient writer to work with you to craft the letter.
5. Limit or Waive Some Contingencies.
If you want the home and you are aware that other bids are coming in then you should not make too many demands on the seller. You should not include things like needing a partner or spouse’s approval, asking the seller to pay closing costs or other contingencies like repairs. You should focus only on the most important repairs that could prevent you from getting a mortgage.
Having too many contingencies in your contract may have a detrimental effect on the seller and make him/her turn down your offer.
You can make your offer even more attractive by skipping the whole house inspection. This will give you a comparative advantage as it will save the seller from the stress and hassle of any possible expenses. However, this is very risky as you may later find out that there are some serious issues in the home and you need to shell out extra cash to fix them.
6. Be Flexible
Finding out what makes the seller’s life easier and being flexible about certain details is as good as coming to the table with cash. The seller may want to stay in the house a little longer as they have to find a place near their new job or want their kids to finish the school year before they move. You can offer to adjust the closing date by leasing back or renting the house for a fixed time. Extending this courtesy will make your offer more attractive as sellers can save money on moving expenses and also have time to find another home.
If the home is already vacant sellers will be worried about theft, liability, and holding costs and will want to sell their home as quickly as possible. So, if you can offer to close early it will give you an edge over the other buyers who do not have a pre-approval or who need to sell their current home to purchase this property.
The home buying process can be stressful and cutthroat at times. So, if you want to win the home of your dreams follow these strategies and work with a well-informed estate agent to make a competitive offer.
If you are thinking of buying your dream home, take the first step by contacting us today for a pre-approval.