How to Win a Home Bidding War without Losing your Soul
The housing market is no stranger to the ebbs and flows that create supply and demand. This is a conundrum in highly sought-after areas where there is an ever-increasing limited supply, which only increases demand. In this scenario, homebuyers often find themselves bidding against each other to pay more for homes.
According to The National Association of Realtors, at the end of July, there were 2.13 million existing homes available for sale across the country. Believe it or not, that is actually 5.8% lower than one year ago. What’s more concerning is that the inventory of homes for sale has fallen for 14 straight months.
What does this mean? War! Home-bidding wars to be exact.
When you find yourself in a bidding war you can expect multiple offers that unfortunately push home prices even higher. If you add low mortgage rates into the mix, buying a home can feel like you’re about to give up your soul to get the home of your dreams; or at least the home that you can fix up to be the home of your dreams.
It’s not all bad, if you’re a seller this can be a good thing. A bidding war could significantly increase the price of your home.
However, if you’re buying a home it can bust your budget, potentially putting the home of your dreams out of reach.
Now what? First, you need to evaluate your situation. Ask yourself, is this a “must have” home? If you decide to go for it, here are a few tips.
Hire a Professional
Your first step, before making any offers is to hire a professional with experience in this type of scenario. A professional real estate agent will be on your side and knows the local market and can guide you through the muddy terrain of tough and oftentimes complicated negotiations.
Hire the right agent. Find someone who has experience in bidding wars and multiple-offer situations. Their expertise and ability to explain things to you clearly every step of the way will be priceless.
Keep your Emotions at Bay
No one wants to get involved in a bidding war, but if you find yourself in this situation, try and keep your emotions at bay. It’s important to set a budget and stick with it, don’t allow yourself to get upset if you lose, there will always be another property and opportunity. Most importantly, don’t be afraid of walking away.
Being prepared is always a good idea when considering a home purchase. In the reality of home shortages, it’s especially important to have your finances in order. Be sure to have your loan pre-qualification in hand for your first appointment with your real estate agent.
Highest and Best
If you know the home you have walked thru and it’s the one, then you always have an opportunity to go in with your highest and best offer. This shows the seller you are serious, especially if you are able to offer more than list price. After you’ve done your research and talked with your real estate agent and loan officer, make an offer based on what you think is fair based on the research you and your agent have done.
Flexible Closing Date
Offer a flexible closing date. Consider the possibility that a seller may be going through a similar situation and needs to make accommodations to sell their home in order to purchase a new home themselves. This could be causing them additional stress and if you’re able to show flexibility and accommodation, this could make your offer more attractive. When I bought my new home, I couldn’t move out until a certain date and the buyer let me rent for a set period of time giving my family and I ample time to get our affairs in order.
I know that when we extended the courtesy to the homebuyers it saved them time and money.
Write a Letter
When I found a home I was interested in purchasing, at first I was outbid, however, the intended purchaser’s financing fell through, so I was back in the game. I increased my offer a little and wrote the owner a letter explaining why I had fallen in love with the home. A well-written letter is considered a ‘love letter’ to the seller.
I explained how the location was perfectly centered between my parents and my brother. I also explained how the home was walking distance to my dear friends and my church. I also knew the seller had pets and I share a photo of my pooch and explained how the fenced in yard would be ideal for us.
I painted a picture of how I would enjoy and love the house the owners had lived in for over 30 years. A “love letter” of this nature shows the seller that you have a human side, that this is not just a competitive offer situation, that this is a family and people, a human transaction.
When you are at “war” albeit a bidding war, this is cause to get creative, an opportunity to think outside of the box and go beyond the normal rules of engagement in your purchasing strategies.
Determine how far do you want to go?
Do you want to increase your earnest money?
Do you want to cover the seller’s costs to include covering moving costs?
Are you willing to adopt their pets if they are in a situation where they can’t take them with them?
How much do you want the home, how far are you willing to go to win?
When you start the home buying process you should be prepared for any situation, including a bidding war.
Work with an experienced lender so they can give you advice each step of the way.
If you are ready to start the home buying process and find yourself in need of down payment assistance, take a look at the many programs available on our homepage or get in touch with us today at (602) 429-6789 to learn more about which programs are a good fit for you.
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