Bidding wars have returned to many real estate markets across the nation, and some buyers may find themselves competing for the home they want. While not all markets are created equal, several are experiencing a reduced home inventory which results in homes receiving up to 10 to 15 offers the day they hit the market.
Bidding wars are becominng the norm across the United States as housing inventories lower, particularly for lower priced homes.
The good news is that you can prepare to enter into a war and get the home you want with some financial preparedness to help you gain the advantage. Knowledge is definitely power in this game, and the more you know the better off you're going to be. Get ready to familiarize yourself with property values in the neighborhoods you're interested in. And know exactly what you want.
One of the first steps toward winning a bidding war is having everything financial done and taken care of before you begin to look for your next home. Many buyers tend to talk with their lender and shop for a new home simultaneously, but the key is to begin your search after the finances have been arranged.
That means having your lender of choice selected along with a loan product, and having everything they require completed-then step into the game with a preapproval letter in hand. Have all of this done before submitting an offer. It's wise to have a "new home file folder" on hand with your most updated pay stubs and bank statements along with any other documentation the lender may need in order to make a quick loan approval.
Having a preapproval is absolutely essential, especially in a competition against buyers who have cash to offer. Even a hint that you may have difficulty qualifying for a loan can toss you out of the competition, and outside the seller's choice of buyers. All cash buyers have the advantage, and they can even waive the appraisal. If you're a non-cash buyer pitted against a cash buyer, it's imperative to have a copy of your proof of funds along with your offer and strong preapproval. At a minimum you should expect to put 20 percent down, and be prepared to make up any difference that may come up if the appraisal comes in too low. It's even better if your offer includes every detail of your financial capability, including your job history, salary & bonuses, 401(k) balance, as well as the amount you have for down payment and the location of the down payment.
Also, having a higher than customary down payment can definitely be impressive to sellers in the event of a bidding war.
It's helpful to check in on the market to spot homes the day they become available so you can move quickly. Your buyer's agent can make a world of difference on your behalf by finding out what is motivating the seller and what they need. Be sure and work flexibly to accommodate the things the seller is asking. If you make it easier on the seller, you'll be chosen above others.
Another thing you can do is avoid adding conditions to your offer. If your offer is well within your budget, you may do well to leave out the only if's. To a seller, a no condition offer is always more appealing since it prevents them from having to pay for any repairs that are recommended after an inspection. This may be a riskier move for homebuyers, but it's a decision that can lead to winning the home bid.
Make your initial bid your best bid. For the vast majority of the time, homebuyers are allowed just one shot at an offer, so it must count. This is where it's key to do your research and find out the market value of the home by looking at other homes in the neighborhood. It's also in your best interest to know how many other offers are being made, since the more offers there are, the higher the selling price is likely to be. Once you've gathered as much information as you can on the home in question, offer the highest possible price while avoiding emotional bidding and offering more than you have available. Offer the highest amount of earnest money possible and be prepared to offer the seller appropriate documentation that shows the source of your down payment.
You can also offer the seller extra time. For anyone whose done it, they'll tell you that selling and moving out of a home is a very stressful experience that involves a whole onslaught of tasks all while moving from one location to the next in what is often a short amount of time. By offering the seller additional time than what was originally stated, it can make the difference between which bidder the seller decides upon. Offer the seller a few extra days without compensation in order to move out. A few extra days can be more than enough time to help the seller with their moving out process and put you a few steps closer to owning your dream home.