The housing market is slowly making its way back to being more competitive. As the economy betters, the unemployment rate goes down, and buyers are confidently pursuing the properties they want, there’s a greater chance that house hunters will run into a situation where there are multiple potential buyers.
A housing market with motivated buyers is a best-case scenario for many sellers. Nearly 24 percent of homes that sold in the U.S. in 2017 brought in a higher bid than the asking price. Whether you’re searching for a single-family home, a downtown condo, or a co-op unit, placing a bid on a property needs to be a strategic move. As you discuss your budget with you realtor, keep these ideas in mind to avoid or win a bidding war.
Know The Property
The best option for any home buyer is to avoid a bidding war altogether. Communicate with your real estate agent to understand the property, the seller, and the seller’s situation. Homes are often priced just below or at market value to attract many buyers. For that reason, it may be a strong tactic to make a bid above asking price, showing the seller your serious and want to avoid lengthy negotiations. The seller may be emotionally connected to a home or ready to rid of the property at the first strong offer – your agent should do the homework to determine the seller’s stance.
Cash Is King
All cash offers are an easy, favored move in real estate. The ability to make a cash offer on a property strongly increases your chances of successfully bidding on a home The Wall Street Journal reports an all-cash offer improves your success rate of getting the property by 97 percent. If you’re eyeing a luxury property – the top 10 percent of properties based on list price – the success rate with a cash offer more than quadruples to 438 percent.
Waive Financing contingency
A buyer typically includes a financing contingency clause that says the buyer will purchase the home at the price agreed upon but only if the bank approves a mortgage for that amount. Without the financing contingency clause, a buyer must fork over the difference in cash between the purchase price and what the lender will offer through a mortgage or walk away from the property and lose all earnest cash. The seller can even take legal action if the buyer refuses to purchase due to financing issues. Eliminating the contingency is definitely a risk for the buyer, but the success rate of placing a winning bid increases by 58 percent when you waive the financing contingency clause.
If the seller is emotionally invested in the home, or is selling for a reason other than money, getting personal may help you land the home of your dreams. When you make your offer, include a personal letter that expresses your appreciation for the home, a common interest with the seller, or your plans to make the house a home with a growing family. Getting a glimpse into your life may push the seller’s favor in your direction.
Be strategic with your bid. Show the seller you’re serious, and when the situation is right, build their confidence in you with a personal touch.