How Buyers Can Increase Their Odds of Winning a Bidding War
Bidding wars have long been a common trend in California’s housing market over recent years, though the rates seem to be declining somewhat. That said, California – especially certain markets like San Francisco and many southern markets – still remains one of the hottest bidding war centers across the nation.
While that might be great news for sellers, it can be a source of frustration for buyers. It can be daunting to approach an offer situation knowing that you’re competing with a number of other buyers vying for the same property.
Having said that, there are certain things that buyers can do to strengthen their position when faced with a potential multiple offer situation. If you’re a buyer entering the real estate market in a hot California market, consider the following tips to help you boost your odds of winning a bidding war.
Get Pre-Approved
One of the most important things that buyers can do before putting in an offer is to get pre-approved for a mortgage and crunch the numbers. This is especially important if a bidding war is imminent.
Getting pre-approved for a mortgage is important for a number of reasons. For starters, it will help you determine exactly how much you can afford in a home purchase and how high you can go with your offer. In bidding wars, it’s customary for buyers involved to incrementally increase their offer prices in an effort to outbid the others.
While you might be emotionally ready to go well over the asking price, this could turn out to be a huge problem if you wind up paying more than you can comfortably afford. Not only do you have to factor in mortgage payments, but also all other bills that will have to be paid, including utilities, property taxes, and homeowners insurance. By being pre-approved, you’ll know what your limit is and how far you can go.
A pre-approval letter is also helpful because it can make you a much more competitive candidate in the eyes of sellers. Typically, sellers prefer to work with buyers who they know are eligible for mortgage approval. In a bidding war situation, sellers want to waste as little time as possible. And choosing a buyer who is pre-approved for a mortgage over another is one way to ensure that.
Put in a Solid Offer Mid-Week
Weekends are traditionally the busiest times for property visits given the fact that people are usually off work and have more time to dedicate to house hunting. If time permits, consider visiting homes early in the week and give yourself enough time to really scope out a home in great detail. If your finances are already lined up and you’re ready to put in an offer, do so before the weekend rush.
By beating out the weekend competition, there may be less of a chance of getting involved in a bidding war. If the offer you present is solid and attractive to the seller ahead of the rush, there’s a chance that they may seriously consider your offer instead of waiting if there’s anything better out there.
Keep Your Offer Clean
The less red tape that a seller has to go through, the better. That means an offer that is filled with all sorts of different contingencies probably won’t fly in a bidding war situation.
Even if your offer price is high, sellers might not want to take a gamble on an offer that might not go through if any one of the contingencies cannot be fulfilled. In a bidding war situation, the fewer the contingencies the better.
Be Flexible With the Closing Date
Every part of an offer will be analyzed by the seller, and that includes the closing date. If you’re competing with another buyer who has offered the same price, something as seemingly insignificant as the closing date can be the deciding factor in which offer the seller chooses.
Given this, it’s extremely helpful to be very flexible when it comes to the closing date. If it works for you, consider giving the seller whatever closing date they want. If moving the closing date up, for instance, works better for the seller, be open to this option. Flexibility can work wonders in a bidding war situation.
Be Prepared With a Hefty Earnest Money Deposit
A big deposit shows sellers that you’re serious and are financially prepared to buy the house. Offer a bigger deposit than the sellers expect, and make sure to submit a certified check along with the offer to show the sellers that you mean business. Since typical deposit amounts can vary from one jurisdiction to another, have your agent verify what that particular number is in your area – and offer more.
The earnest money deposit goes towards your down payment anyway if you end up the winner. And if your offer isn’t chosen, you’ll get it back. A clean offer with a hefty earnest money deposit could mean the difference between winning or losing the deal.
Write a Letter to the Seller
If there’s something about the home you’re putting an offer on that has you emotionally attached to it, let the sellers know. Tell them how much you love the house and how you will make it a home for you and your family. Explaining to the seller why you want the property so much could tip the scale in your favor.
Buying and selling a home is an emotional process for all involved. And if the seller has lived in the home for a number of years and raised a family there themselves, they may appreciate knowing that the home is going to be left in the hands of someone who will care for it as much as they did.
The Bottom Line
Going up against other buyers in a bidding war can be an overwhelming experience. It can also be a frustrating one, especially if you’ve lost out on other bidding wars in the past. If you think you’ll be faced with yet another multiple offer situation, make sure to go in with your best foot forward, and always arm yourself with a seasoned real estate agent who’s experienced with handling bidding war situations.
