If you’ve ever watched HGTV, you have likely seen shows such as Property Brothers in which a couple is influenced to buy a fixer-upper home. One of the big moments during the beginning stages of this process happens when the couple has to place an offer for the home. Usually, there is at least one other buyer also looking to make an offer on the home. This is what is known as a bidding war, one that ultimately ends with the seller choosing one offer over the other.
As the demand for homes skyrockets during the COVID-19 pandemic, the pressure is on for each buyer to make a truly compelling offer the seller simply cannot refuse. How does one go about doing this effectively? Here are some tips to consider when engaged in a bidding war:
One compelling way to stand out among a crowd of potential buyers is to present the seller with a pre-approval from your lender. This basically tells the seller what you have been definitively approved to offer them for the house. It shows that your offer is not only serious but dependable. Showing this form to the seller also allows them to rest easy knowing you can be counted on to deliver whatever offer is presented.
Prepare to increase your offer
This goes without saying, but a typical bidding war means preparing to offer more than simply the selling price for a home. If you are able to outbid your competitor with a sweet deal, it easily gives you the edge you need to close the deal. However, it also goes without saying that this approach should be handled with an abundance of caution. If the bank lending on your behalf approves your loan for a specific amount, going above that may result in you having to pay the extra amount used to win the house.
Remain flexible with contingencies
As important as it is to not simply walk into a situation as important as buying a home without any contingencies, allowing for flexibility makes the process smoother for both sides. Something as simple as being willing to extend the deadline to close on a deal can put the seller at ease if they too are looking to move by a particular date.
Ask yourself what is most important to you in not only buying a home but ensuring it is in proper shape and then consult with your real estate agent to find the best strategy. Remember that your agent is on your side and wants the deal to go successfully.
Consider a bigger down payment
Much like buying a car, putting a bigger down payment on a house accomplishes a couple of important things. First, it reduces the amount the lender has to finance the house for, thereby helping reduce your monthly payments on the property. In addition, it gives the seller the impression that you mean business about buying the home and are willing to literally put your money where your mouth is.
Finally, a popular strategy is to write the seller a letter making the case for why you desperately want to buy the home. This may not always work but, if done effectively, could sway the odds in your favor. Consider different angles to take in making a good case. Do you have or desire to raise kids in this new home? Did you grow up in the neighborhood in which you are attempting to buy the home? Consider consulting with your agent for the most effective approach.
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