After a long search, you've finally found the house you want. The only problem is, someone else wants it too.
Bidding wars are common, especially when interest rates are low. If you're not careful, they can drag on forever and cost you much more than you were initially prepared to pay - if you win the war at all. Our real estate agents can help you hold your own when there are multiple bids. Here are a few tips for making it through a bidding war and coming out on top.
Before you start bidding on a house, make sure you can get the money to back it up. Get a letter of pre-approval from your lender, indicating that they've checked your income, credit history, etc., and are ready to give you a mortgage up to a certain amount. This shows the seller that you're serious about buying, and that you'll be able to pay for the house once the bidding war ends.
If you're able, cash is a great way of getting a seller's attention. You can often get away with a lower bid than the competition if you pay all the money upfront, since it cuts through the red tape, such as loan approval, and makes the process go much quicker. If you can't afford to pay the entire amount in cash, a larger down payment can work in your favor as well.
Most real estate deals involve contingencies - specific criteria that must be met for the sale to go through. The appraisal contingency, for example, dictates that the property must be valued at a specified amount before the sale goes through, to avoid paying more than it's worth. The inspection contingency says the home must be inspected for any damage or necessary repairs, and the price be lowered or the repairs made before the sale goes through. If you're in a bidding war, you can boost your chances by letting go of these contingencies. By agreeing to pay more than the appraised value of the home, or overlooking necessary repairs, you can make your offer more attractive to the seller. Not only does it net them more money, but it also cuts through a lot of red tape that those contingencies would otherwise require, saving time and reducing hassle - both very important steps when it comes to real estate negotiations.
Know When to Walk Away
Eventually, it may reach the point where the price of the property has just gotten too high. If that happens, you need to walk away, to avoid paying more than you can afford. Decide at the very beginning how high you're willing to go, and don't exceed that amount. If you don't set your limit, the heat of the bidding war can quickly push the price out of your comfort zone before you realize it. One way to boost your chances without spending more than you bargained for is with an escalation clause. Tell the real estate agent that you'll beat any other bids by a set amount, up to your limit. So if the other person offers $500,000, the agent knows that you'll pay $505,000. But if someone offers $550,000, the agent knows you won't go beyond that.
Bidding wars can be stressful, but the good news is the right real estate agent will help you every step of the way. Contact us today for experienced help on your next real estate transaction.