Real estate bidding wars are exciting. If you’re a buyer, there are multiple things you can do to increase your chances of winning.
Know Your Limits
This is especially true for first-time homebuyers. They’ve never gone through the emotions of purchasing real estate. It’s important to not overbid for your dream home. You need to calculate how much home you can afford. You can do this by using a mortgage calculator. Be honest with your budgeting. If you have to cut all overseas travel to get your dream home, is it worth it? The answer will vary from person-to-person, but awareness of the financial costs is important.
Get a pre-approval letter
This is quite easy to do with a short visit to a bank. This letter is necessary for your bid to be taken seriously by the seller. Shop around when getting your pre-approval letter. Some banks might have a lower interest rate or lower fees.
Realistically, few people have the funds to make an all-cash offer. Often, it’s a business owner or a high-level executive. Sellers love all-cash offers. There’s no waiting around for the underwriting department to approve the loan (which can take almost a month) and no risk of rejection. Many sellers are willing to accept a lower amount when it is in cash versus an offer with a mortgage.
Increase offer amount
A house is a financial asset. At the end of the day, the money is what most sellers are focusing on. By increasing the offer amount, you’re greatly increasing the chance of your offer winning. This does not need to be a huge amount of money. Often, the winning bid is only a few thousand dollars more than second place.
However, remember that the bank will not allow the mortgage to exceed the appraised value. Your bid must be grounded in reality. Otherwise, you’ll need to bring more funds to closing.
Contemplate Waiving Certain Contingencies
This tactic can be risky and is not for everyone. Some daring buyers are willing to give up financial and inspection contingencies and sellers like this because less can go wrong from their point of view.
Remember though, contingencies protect you because they allow you to back out of the transaction. Many things could go wrong and you have a lot of money on the line. Whether it’s worth the risk is a personal decision.
Be Ready to Move Rapidly
One strategy is to add an escalation clause to your offer. You can tell the seller that you’re willing to up your offer by an amount if your offer is matched by another buyer. Another thing you can do is have the inspection of the home done rapidly. Sellers hate it when the post-offer period is drawn out.
Be accommodating and Flexible
Some sellers want to move as fast as possible. Maybe they found an investment opportunity or want to buy a new car. Others want to do the process slowly. They might want their kids to finish the school year. Figure out which one your seller is and accommodate them.
Depending on how many participants there are, bidding wars are challenging to win. Increase your chances by following our tips.