How to strategically position yourself as a buyer or seller to secure the winning bid.
In seller’s markets, when demand is high and inventory is low, buyers often have to go above and beyond to make sure their offer stands out from the competition. Avoid a bidding war write an offer quickly and make it attractive to the seller at the onset by making your purchase contract a convincing one.
Here are a few tips for buyers and sellers about how to navigate a multiple-offer situation in a home sale.
How to Navigate a Bidding War as a Buyer
First Offer = Best Offer
Don’t play around with the asking price of the home. Do your research and if the house warrants full price, offer full price. Offer above the asking price if interest in the property is high and your mortgage preapproval covers the higher price.
Submit Proof of Funds
Sellers look for strong buyers who aren’t at the mercy of mortgage lenders or appraisers. Showing funds available reassures the seller that you can make up the difference if the home doesn’t appraise up to the mortgage amount. Also include a hefty deposit with your offer to show the seller that you’re a serious buyer.
Avoid Contingencies
Include home inspection and financing contingencies, but don’t ask the homeowner to compensate you for small problems the inspector finds. Remove other minor contingencies and make your offer as clean as possible.
Flexible Closing Date
Find out when the seller wants to close and write your offer to coincide with his plans. Freeing the seller of pressure to move makes your offer more attractive, especially if there are children and school terms involved.
Include an Escalation Clause
An escalation clause can be an excellent asset when trying to win a bidding war. Simply put, the escalation clause is an addendum to your offer that states you’re willing to go up by X amount if another buyer matches your offer.
How to Navigate a Bidding War as a Seller
For sellers, properly handling this exciting but likely stressful process is paramount and an experienced real estate agent should be able to guide you. Above all, it is important to manage the offers and buyers, so nobody feels misled.
Get smart:
Sellers and their agents should gather as much information as possible about each buyer. Are they financing or all cash, and if they’re taking out mortgages, have they submitted preapproval letters from reputable financial institutions to accompany their bids? Are these buyers’ flexible on the closing date? All of this is relevant in helping to choose not just the right buyer from the pack.
Know the best offer might not be the highest:
Even if one party is offering you more money than another, it might not be the best offer. Money is money, but a cash offer is generally stronger than an offer that comes with financing. But if the purchase requires further approval, perhaps from a homeowner’s association or from a co-op or condo board, then vetting each buyer is even more relevant and imperative.
Leave the door open with your backups.
In a competitive bidding situation, buyers can become overly enthusiastic, get caught up in the moment and bid above their comfort level or well above their perceived value of the property.
Bidding wars are more common under certain housing market conditions than others, but a great property that is priced well will almost always get the attention it deserves
Hiring the right real estate agent is paramount in today’s market and will help you avoid all the pitfalls of selling or buying your home.
