Knowing How to Bid to Win in a Tight Housing Market
7 Things You Can Do to Strengthen Your Real Estate Bid
A tight housing market is great if you’re a seller, but it can be especially frustrating for a buyer; the reason is competition. There are more buyers bidding on fewer houses, so bidding wars become commonplace. And, you don’t want to get into a serious bidding war because you’ll wind up paying more for the property than you’d like.
Luckily, there are several ways to strengthen your bid, so the seller will give you serious consideration, and with a little luck, accept your offer. Here are seven ways to bid to win in a tight market.
#1: Make an All-Cash Offer
Understandably, not all buyers can afford to buy a home outright with cash, but if you can, this is the way to go. An all-cash offer almost always wins the bid because it speeds up the closing and prevents the financing uncertainties that can sometimes crush a sale.
#2: Get Pre-Approved for a Mortgage
If you can’t buy the home with cash, then your next best bet is to get pre-approved for a mortgage. Unlike a pre-qualification, a pre-approval letter from your lender is proof to the seller that you have the financing already approved and available. With this letter, your bid will carry more weight than bids from buyers who haven’t been pre-approved, because there’s always the chance that they could be denied their financing.
#3: Submit Your Offer Quickly
Most sellers don’t accept the first offer made, but getting your bid in early will mean they’ll come back with a counter-offer more quickly. This will let you know where the seller’s head is at, and what they will be more than likely to accept when coming up with your second bid.
#4: Waive the Financing Contingency
Waiving the financing contingency can push your bid to the head of the line, but it’s not without risks. You should only offer this if you know 100% that you are approved for financing, because if your bid is accepted and your financing falls through, then you’ll be forced to pay for the property in full and in cash.
#5: Put More Money Down on the Home
The more money you deposit into your earnest money account, the more serious you’ll look to a seller about buying their home. The important thing to know is that you’ll need to make every contingency and deadline outlined in the contract to be able to claim your money back in the event the sale doesn’t happen for some reason.
#6: Use an Escalation Clause
If you do find yourself in a bidding war, then putting an escalation clause on your offer will help ensure that you always have the highest bid, up to the maximum amount you set. So, if you bid $175,000 on a home and the most you are approved to borrow is $225,000, then your bid will be automatically raised by $1,000 every time someone offers a higher bid. Once the bidding reaches your limit, no further bids will be made on your behalf.
#7: Make Your Offer More Personal
Bids are delivered electronically to agents, who then inform their clients. There’s no emotion attached to the bidding process; everything is cold and robotic. But, you can make your bid more personal by writing the seller a letter, in which you can introduce your family and explain the reasons why their home would be perfect for your family. You can even offer greater flexibility regarding closing, like giving the seller extra time to move out, or any other reasonable requests the seller might have.
At Homes.com, you can search for your next home quickly and easily. We can even help you find an agent in the area where you’re looking to buy. Start your search for the perfect property today!