House hunting? Here’s How to Win a Bidding War
In truly hot markets you may need to write an offer that is well over asking price. Research the market and ask your buyers agent for guidance when deciding on your opening bid.
The housing market is on fire these days and in many cities and towns you may find yourself in a bidding war for the house you want. Listings are at some of the lowest rates ever seen and growing demand has led to both quickly rising home prices as well as multiple offers coming in within a few days of a listing hitting the market.
Bidding wars are extremely common these days and if you aren’t prepared, you will end up losing. We thought it might be a good idea to lay out a few tips for how to win a bidding war so you end up with the house you want. Here are a few strategies that will help you walk away with the keys to your dream home:
Plan Ahead
Don’t go into the process blind or ill prepared. Set a budget and know exactly what your top end is when it comes to pricing. Remember that the purchase price is just the beginning, factor in insurance costs, property taxes, HOA fees as well as the cost of upkeep.
Keep this maximum price in mind when shopping for homes, try to look at homes that come in somewhat below your max price so you have some wiggle room and can go up in price if you need to in order to win the house.
Get Your Financing in Order
If possible, bring a cash offer. This will almost always give you a leg up in the bidding war as the seller doesn’t have to worry about financing or your loan falling through at the last moment. If you live in a particularly hot market you may be up against investors who will often bring all cash offers.
If you are unable to write an all cash offer (and most of us can’t) get a pre approval from a bank or mortgage broker. This will let you know exactly how much home you can afford as well as letting the seller know that you are serious and have the financial wherewithal to purchase their home.
Make an Offer Quickly
In a hot market every minute counts so get your offer in quickly if you are sure the house is the right one for you. It is always a good idea to come in strong in a hot market so write an offer that is close to the asking price. A lowball offer will only insult the seller and ensure that your offer is rejected.
In truly hot markets you may need to write an offer that is well over asking price. Research the market and ask your buyers agent for guidance when deciding on your opening bid.
Dump the Contingencies
An offer filled with contingencies is going to move to the bottom of the pile if the seller has multiple offers. If possible leave out the financing contingency as well as the contingency related to selling your home. Make your offer as clean as possible but it is never a good idea to exclude the inspection contingency. You will want to have the home inspected to make sure there are no hidden issues.
Pre- Inspection
Get the inspection done before you even write the offer, while this will cost a few hundred dollars that you will be out if your lose the bidding war, it makes your offer cleaner and could move it to the top of the pile. Getting the inspection out of the way means you don’t have to include an inspection contingency in your offer.
Write a Letter
Selling a home, especially a long term one, can be very emotional and many sellers want their home to go to a person that they like and feel will take care of their house. Writing a personal letter can tip the scales in your direction. Include plenty of details about why you love the house and the neighborhood and how this home meets your particular needs and wants. Be specific and tug on the heartstrings.
If you are an investor, buying the home as a rental or planning on gutting the house, skip the letter and keep your plans to yourself.
Know Your Limit
While losing a bidding war can be heartbreaking it beats being house-poor. Be prepared to walk away if necessary and always stay under the maximum price you established.