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June
15
15
What to do When You're in a Bidding War
When the real estate market favors sellers, our real estate agents know that it's common for homebuyers to get into a bidding war. A bidding war occurs when two (or more) potential buyers put in offers on a home at the same time.
If one offer includes terms or conditions that are more favorable, the seller can select that offer. However, it's also possible that the buyers will need to revise their offers one or more times until one offers a higher price. Here are some guidelines to follow when you're in a bidding war.
- Secure Financing
Before you start looking at homes, get preapproved for a mortgage. During a preapproval, your lender will run your credit and examine your financial information to determine how much they should lend you. The process is more stringent than getting pre-qualified for a home loan and demonstrates to the seller that you have the finances and credit to actually purchase the home. It's always a smart idea to obtain mortgage preapproval when buying a home, but it's essential when you're likely to find yourself in a bidding war. A home seller will find an offer that includes proof of the buyer's ability to procure financing more appealing than one that doesn't.
- Revisit Your Contingencies
Contingencies are conditions that you include in your home offer that must be satisfied for the sale to close. When you're in a real estate market that's conducive to a bidding war, try to limit the contingencies that accompany your offer. Fewer contingencies are more appealing to home sellers because they reduce the amount of items that must take place before the deal can close.
- Make a Solid Offer
A bidding war isn't the time to try to save a few thousand dollars on the cost of the home. Instead, decide how much you're willing to pay for the home (and how much you can afford) and make a solid, top-dollar offer.
- Incorporate an Escalation Clause into Your Offer
An escalation clause is a useful addition when you're facing a bidding war. An escalation clause states that if the seller receives another bid or offer on the home, you're ready to beat that bid by a specific amount. For example, assume that you make an offer for $250k. Your escalation clause states that you'll beat any bid by $3,000, up to $300,000. So, if someone else makes an offer for $265,000, your offer will automatically increase to $268,000 due to the escalation clause.
- Be Ready to Respond to the Seller
Buying a home in a hot market isn't the time to go on a technology detox. Have your phone nearby, and be ready to quickly respond to phones, messages, and emails. The seller may want to know if you're willing to accept a quicker closing date or if you're willing to make a counteroffer.
Want to find a home that meets your homebuying checklist? Contact us today!