Bidding Wars: Tips to Home Buying Victory
5 Ways to Improve Your Odds for Bidding Success
When a bidding war starts on a home, it’s great news for the seller. Except, of course, when you’re the one who’s trying to buy the home – in this case, a bidding war can be frustrating and stressful. Hopefully, you’re aligned with an experienced real estate agent because a good agent is a reliable source of information and advice who can help navigate you through the process.
However, even the greatest agents can’t guarantee victory. There are dozens of reasons why a seller may pick one bid over the others, and it doesn’t always come down to who bids the highest. But, there are some things you can do to help make your bids look more attractive to the seller. Here are five tips that might just help you win the bidding war.
#1: Get Pre-Approved by Your Lender
These days, no smart home buyer enters the field without first getting pre-qualified for a mortgage by their lender. One way to stand apart from the other bidders is to take things a little farther by getting pre-approved for your mortgage.
While a pre-qualification states that the bidder has the income and credit history necessary to qualify for a mortgage, a pre-approved mortgage is already underwritten and just waiting for appraisal. A letter from the lender indicating that you are pre-approved for a mortgage carries a lot of weight in a bidding war, and shows the seller that you are serious about buying their home.
#2: Keep the Contingencies to a Minimum
Every home buying negotiation usually consists of certain contingencies being named by the buyer. This can include anything from asking the seller to pay some or all the closing costs, to the seller making necessary repairs before the home is sold.
Sellers don’t like contingencies, especially in a bidding war situation. So, if you really want the home you’re bidding on, then you will want to keep your contingencies to a minimum, if any at all. A bid with no contingencies will definitely grab the seller’s attention.
#3: Use an Escalation Cause
An escalation clause is a contract addendum that can be very helpful in a bidding war. This clause enables you to raise your bid by a certain amount and up to a certain amount. For instance, if you place a bid on a home for $150,000, you can include an escalation clause that will increase your bid by $2,000 any time another bidder outbids you up to a certain amount, like $180,000.
If the bidding war reaches $180,000 and someone bids over you, then you are automatically taken out of the running. An escalation clause ensures that you are always the top bid up to the highest amount you’re willing to pay.
#4: Build a Relationship With the Seller
In serious bidding wars, it can serve you well to write a personal letter to the seller. In it, you should explain how much you love their home and what it would mean to you and your family to live in it. You can even include a picture of your family, so the seller sees the face behind the bid.
#5: Be as Flexible as You Can
If you are outbid and you just can’t afford to make another bid, one way you can make a seller choose your bid over the higher one is to be more flexible on the closing. For instance, you can give the seller extra time to move out of the home. Or, if the home is vacant, you can offer to close on the home earlier than usual. You can even offer to rent the home back to the seller for a period, so they can have more time to find their next home.
Winning a bidding war often involves much more than just making the highest bid. A home seller is always emotionally connected to their home, despite putting it on the market. They want to know that the person they are selling their home to will love it as much as they do. Keep this in mind when you’re involved in a bidding war and follow the above tips to give you the best chance of winning.