It is imperative that buyers make as compelling an offer as possible when an attractive house is available in this highly competitive market. A good strategy is to hire a real estate agent who is experienced in dealing with multiple offers and is also familiar with the complications that come with this. An expert will then be able to assist the buyers during the bidding war and offer some of the following tips that will enable them to set their offers apart from the rest of the competition.
Letter of Pre-Approval
The lender should keep your pre-approval letter current, within 20 days, and if you can, specific to the house you're bidding on. When choosing your lender, you should take into account whether they'll go the extra mile for you in case there's a bidding war. A mortgage lender should be respected in their specific area, be highly skilled in their area of expertise, and be highly regarded in their local community. When the lender is prepared to advocate on your behalf, he or she will contact the listing agent, if necessary, after business hours, informing them of your eligibility; along with your qualifications and a thorough assessment of your documents.
Prepare a customized letter
It is common for sellers to want to do business with a buyer they feel comfortable with. Most people view their homes as their most precious possessions, and they want to be sure that you will treat the home as well as they have. You can convey your appreciation of the home by writing a letter. You should make sure to address their feelings in the letter. If the family raised its children in the home, how you could imagine raising your children there. If the family home has been passed down through generations with the same care and love, describe how excited you are to be the next custodian of the home, preserving its beauty and detail for future generations.
Bid more than the asking price
Pricing homes aggressively often leads to bidding wars. If there are multiple offers on a house, you know before you make an offer the home will likely sell for more than its asking price. Identifying how much a home will likely sell over the asking price is the difficult part. It is best to submit a generous offer, but also one that is comfortable. Do you think you would be prepared to give up your dream home for an extra $9K? That translates to roughly $5 a day - is that really worth giving up your dream house? Say you offer 80K more than the asking price on an 800k house. You will be able to recover the cost of the offer within a few years as the property values have been increasing at an annual rate of about 10%.
Think about looking for homes that are slightly below your budget so you can put your best foot forward with the funds that you have to work with. Adding homes $50K below your ideal price to your house search may help you win a bidding war since you can offer much more than the asking price. Recent years have seen a growing number of homes sold over the asking price, which is especially common now.
Here are five recent sales that exceeded the asking price:
Escalation clauses can boost your odds of beating other offers in certain situations. This allows you to offer the seller a certain amount over their highest offer up to a fixed maximum price.
Waiving inspections may be an option
To demonstrate your seriousness about a property, you can decide to waive the home inspection. An alternative is to have an inspection performed and state that you will cover the estimated repair costs up to a certain amount. If you choose to go this route, make sure the number is high or it won't be as appealing to sellers. Typically, buyers allow for repair costs of $10,000 - $15,000. However, in a bidding war, these numbers might not be sufficient. Sellers will be confident that you do not intend to back out or renegotiate the sale as you have shown them that you are fully engaged in the purchase.
Reduce contingency timelines
You may want to shorten contingency dates on inspections, purchase and sale, and mortgage. To figure out the earliest mortgage contingency date, speak to your lender.
Make Your Down Payment Larger
Sellers may consider a buyer who makes a larger down payment, such as 10-20%, to be more qualified than one who makes a smaller down payment, such as 3.5-5%. If you can, consider putting down more money. If you can, borrowing from your investments or retirement accounts could be a useful method to bring your down payment to 20%. This option may be more sensible, rather than paying mortgage insurance that comes with an upfront fee and a monthly fee if you put less than 20% down. An additional way to strengthen your bid is to submit a larger deposit. It is common for buyers to submit a deposit of $1,000 with their offer, followed by a second deposit with the purchase and sale. Wouldn’t it make sense to put $5,000 upfront if you were going to have to at the end anyway?
Be willing to adjust on Closing Date
In some cases, sellers have rigid circumstances and must sell to a buyer who can accommodate their schedule. If you want to stand out from the crowd, be as accommodating as possible.
Consider allowing a use and occupancy agreement or also known as a “lease back.” Before moving into their new home, some sellers need to live in their current home while they wait.
A U&O agreement is a great option if a buyer is under a lease that they don't want to break or if they're selling a home and don't want to worry about packing and moving right away. In addition, by closing earlier, you are more likely to lock in an attractive interest rate. If you wait until the seller's timeline can be accommodated, you might have to pay for an extension of your rate lock.
If you are thinking of purchasing a home, you hope to find the right house at the right price and make the winning offer. Getting what you want the first time is not always simple and you may not always get what you want the first time. You will stand out to sellers and their listing agents if you have the best real estate professionals behind you. To beat out other offers and ultimately win the house you want, you need to do your due diligence, hire the best agent, and use the right lender.