10 Strategies To Win A Real Estate Bidding War
Home sales are up this year, but real estate experts describe the nation’s housing recovery as fragile because in many parts of the country thousands of home lots remain undeveloped, vacant houses remain unsold and prices are still up and down from month to month.
Even so, bidding wars, which caused many buyers to grossly overpay for their homes in the mid-2000s, are returning in many neighborhoods in Seattle, San Francisco and Washington, D.C., to name just a few cities. In the Atlanta area, builders are bidding against each other for land in and around the city. And foreign buyers are bidding up condos and apartments in cities such as New York and Miami, often paying with cash.
If you live in a part of the country where bidding wars have returned, you don’t have to be a fat cat to get the house of your dreams. Here are 10 strategies that can help you beat the competition.
Being in the midst of a bidding war is no time to be picky. It is the right time to overlook relatively little things that bother you. Offer to take the house in as-is condition. Many of your competitors won’t do this, but it really isn’t a huge risk. Have the place inspected and cancel the deal if the inspection turns up something you just can’t live with.
Sometimes buyers who make the first offer are rewarded for their quick action or for their lucky timing, whatever it happens to be. Making an offer just as a property is listed or before it is listed (if you have inside information) sometimes keeps a bidding war from happening in the first place, and if nothing else, it lets the seller know you are a serious buyer.
That is, offer more earnest money than you’re required to offer. One percent is typical, but offer 2, 3, 4 or even 5 percent. This does three things. It gets the seller’s attention. It lets the seller know you are a serious buyer. And it gives him or her the impression that you have plenty of money to close the deal, even if you’re not exactly Mr. Moneybags.
Make your offer as clean as possible with no strings attached so the sale isn’t dependent on you getting a loan, selling your house or even waiving the inspection (though most buyers’ real estate agents will advise against the latter). Speaking of clean, make sure the documents you submit are mistake-free and devoid of unclear language that may cause the seller to ask lots of questions.
Write A Love Letter
Write a hand-written letter to the seller – and include a photo of you and your family – that spells out how much you love the house and how you plan to take great care of it. Think it doesn’t work? Think again. Real estate agents say they’ve seen sellers turn down higher offers and sell their houses to buyers who they believed love their house as much as they do.
If you’re a buyer, make sure you meet the sellers. If they like you, they are more likely to look favorably upon your offer. If you live out of town, this might mean Skyping with the sellers. At the very least, it means having your real estate agent hand deliver your offer to the sellers.
Show Them The Money
When you think you’ll be in a bidding war, you, of course, want to be preapproved for financing. Attach a copy of your approval letter to the offer so the seller knows you are a legit buyer. Some agents – albeit a minority – also advise attaching copies of bank statements or investment statements to the offer.
Show Some Hospitality
Offer to allow the sellers to stay in the house after the closing date if that would be convenient for them. Some buyers make it clear that the sellers can stay there rent free for the first month, though it is common – even in the midst of a bidding war – to charge the sellers rent that equals your mortgage payment or whatever market rates are where you bought a house.
Bend Over Backward
Buyers have made some pretty generous offers which may sound crazy to the rest of us. But they worked. Some buyers have offered to pay sellers’ moving expenses. Others, particularly those who bought a house in a hot tourist destination, have offered to allow the sellers to return to the house to use it as a vacation home for one or more weeks a year. These things might be more than you’re willing to do, but just be creative.
These strategies may not work and you may lose the bidding war, but if you really want the house, let it be known that you want to be called if the deal falls through with the winning bidder. A lot can – and sometimes does – go wrong to break up a real estate deal. If that happens to someone else, you will want to be next in line.
Keep these tips in mind the next time you are trying to lock down the house of your dreams. Doing your homework ahead of time will help to increase your chances of sealing the deal.