December 22nd, 2014 9:47 AM by Jackie A. Graves, President
If you are buying a home at the height of a
citywide seller’s market or simply want a sought-after house in a neighborhood
with limited turnover, you may find yourself in the midst of a real estate
Competing against faceless prospective buyers may bring
out the warrior in you, but before you decide to go all out in your battle, you
need to step back and decide how much you really want that particular home.
Should You Compete in a Bidding War?
In the thick of competition you may forget your end goal
is a home you love and can afford to own. If your offers have been turned down
by several sellers because of competing buyers, then you may feel pushed to
make an aggressive offer for the next home you like.
You should stop yourself from competing just because you
think the time is right to become a homeowner or to move up into a new place.
Instead, think about whether you really want the particular house enough
to fight for it.
To guard against making an emotion-fueled offer for
a house, take a hard look at your finances. While it may feel good at first to
beat out other buyers and to purchase a property, it won’t feel so great in a
year or two when you are struggling to make the payments on a house
beyond your means. Know your limits before you begin to bid.
Prep for Battle
Your first step before entering a bidding war should be
to consult with a lender to understand the maximum amount you can borrow, to
evaluate how much cash you have to spend while keeping enough money in a
Next, make sure you hire an experienced REALTOR® who
can share information about local market conditions and communicate with the
seller’s agent. You should rely on your REALTOR® for advice about how to
handle a bidding war, but be sure to do your own research: visit a lot of homes
in the area where you want to buy so you understand the value of various
properties before you make an offer.
Bidding War Strategies
Your REALTOR® should work with you to craft an
attractive offer based on the list price for the home, a comparative market
analysis of similar homes, and knowledge gained from the sellers’ agent about
the sellers’ motivations and preferences.
In a bidding war, it’s important to work with a
REALTOR® who will move quickly to present your offer and any counteroffer,
one who is easy to communicate with during the transaction.
While you may assume money is the motivator that steers
sellers to one buyer over another, there are other ways to make your offer
attractive, such as these ideas:
may be competing against cash buyers, so make sure your loan pre-approval is in
place and you have completed all required documentation other than identifying
a specific property.
you own a home now, you may want to offer to buy another home without making
your contract contingent on the sale of your current home. You take the risk of
carrying two mortgages for a while, so make sure you can safely handle the
payments. You can also decide to have an “information only” home inspection
rather than making your offer contingent on the outcome of the inspection.
the settlement date convenient for the sellers: Rather than negotiating
on a closing date convenient to all sides, you can tell the sellers you will
work with their schedule or rent back the property to them after the closing.
to pay all closing costs: You
can reduce the sellers’ out-of-pocket expenses by offering to pay their share
of the settlement fees, but before you do this get an accurate estimate of what
those costs will be and make sure you have the funds available to pay them.
the transaction: Sometimes
the tipping point for sellers who receive multiple offers is something
emotional rather than financial. A personal letter describing your love of
their home may tilt the scale in your favor.
clause: Money talks, too, so you can add an
escalation clause to your offer that increases your bid by a certain amount
above other offers. Just make sure you set a limit on how high your offer
that any offer is subject to an appraisal (unless you waive that contingency,
but that’s not recommended unless you have plenty of cash), so be careful not
to bid above the market value of any property.
Michele Lerner | To view the original article click here