Bidding War Strategies for Homebuyers and Sellers
Buying or selling a home in today’s market is not easy. Property values are extremely inflated, and there’s a very limited number of available homes to buy. Bidding wars, for instance, have become the norm in today’s real estate market. Multiple potential buyers compete to purchase a property by using a few tactics including raising the price or offering concessions.
On the other hand, home sellers are happy receiving multiple offers and having bidding wars on their homes. This provides many benefits for both parties, so learning a few strategies can help you win. Consider the following strategies to be your ticket to buying or selling a home in today’s tricky market.
Homebuyers
Have your pre-approval letter ready and make the highest offer
Before you start shopping for a new home, make sure you get preapproved for a mortgage. Having a preapproval letter is an essential part of the process and will show the seller that you’re able to afford their home. This will also give you an idea of how much money you can borrow, which will guide your search for a home. A preapproval letter offers a precise mortgage amount based on your bank statements, credit scores, W-2s, and other official documentation.
Usually, the best way to win a bidding war is to offer the most money. However, the highest offer is not always the one that the seller will choose. Since bidding wars can get emotional, you need to make sure you approach them with caution and don’t ignore your budget. If you have the finances, you can put more money down for the deposit. This will show the seller you’re willing to risk more for a deposit in case something happens with your finances and gives more confidence to your offer.
Drop the contingencies
Sellers don’t want their property to sit on the market for a long time, but also don’t want to have to relist because a contingency resulted in the sale falling through. Contingencies are specific conditions that need to be met for the deal to be successful. However, dropping your contingencies will make your offer stronger and could show the seller you really want to move forward with the purchase.
This also means that you’re willing to pay an additional amount of money at closing if the home appraises for less than the agreed-upon purchase price. However, be careful because you still need to have enough money to cover the down payment and closing costs. Otherwise, you may need to walk away without your money or put less down on the house.
Sellers
Price it right
Keep in mind that nothing will draw more buyers and raise the chances of a bidding war than pricing your home right. Note that the lowers you price it, the more buyers you’ll attract, and the more buyers you attract the more money you’ll receive. Remember that people are naturally competitive, so they often want what everyone else wants.
For example, when a buyer likes a home and is considering making an offer, and finds out other people want it, they’ll be willing to offer more. Pricing your home right means pricing it by what similar houses have recently sold for in your neighborhood. Don’t price it higher just because you have one feature you think is better. If the buyer feels it is worth more, they’ll pay more.
List it in winter and hire an experienced listing agent
Listing your home in winter or early spring can add to your chances, as inventory is lower than in the fall and summer. When buyers usually have less to choose from, and they know that others are interested, they’re willing to pay more. That’s why the height of bidding wars each year is usually from February to May.
Hiring an experienced listing agent is essential to earn every dollar with the best terms in a negotiation. An experienced agent will know how to find the best buyer and how to get them up to the highest price possible. Note that the difference between getting all of your money from the sale and giving up thousands could be up to whom you decide to hire.
Final thoughts – Bidding War Strategies
Homebuyers and sellers should always approach with caution when it comes to bidding wars. They can proceed rapidly, like auctions, causing buyers to make rash decisions to win. Homebuyers, for example, can also consider adding an escalation clause, which will help them become the highest bidder. And if you’re on the seller side of a bidding war, make sure you consider a few things when reviewing multiple offers including cash offers, the buyer’s overall financial strength, your home’s value, and compare closing dates.
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Bidding War Strategies for Homebuyers and Sellers
