HOW TO WIN A BIDDING WAR WHEN BUYING A HOME
Learning how to win a bidding war when buying a home usually comes from losing; as others win you learn. There are fundamental techniques and steps to take that will make your offer shine when multiple offers are received. Working with an experienced buyer’s agent is key; one that can dissect data, honestly guide you, write an effective offer and respond rapidly during the process. Many strong offers are lost because buyer agents fail to respond in a timely manner. In situations where "highest and best" offers are called for, remember; highest is not always best. A cash offer with no appraisal contingency and a few days of due diligence can be more appealing than a 97% FHA offer.
The very first step in winning is not overpaying; know the market. It is critical, whether this is the first home you’re bidding on or the tenth one, to study the data. Don’t let emotion get in the way of common sense; you will be selling this home someday and real estate is a fluid market. Buyers have a strong tendency to get caught up in the emotion of it all, don't. Sometimes you win by losing.
Preapproval & Financing
While filled with “subject to” verbiage, preapproval letters are routinely required. Sellers and listing agents want to know that a buyer is qualified to buy the home they are bidding for. It’s a great idea to use a recognized lender, one that will answer the phone if the seller calls. If using cash, proof of funds should be sent. Each of these documents should be current; something dated two months ago is useless.
Understand What the Seller Wants
What are the seller’s sweet spots? An experienced agent will find out and suggest an offer that lines up if/when possible. There are times when a seller accepts a lower offer if other important aspects are met. It’s also critical to understand how the seller plans to handle multiple offers. Will they set a time limit for everyone to bid or do they want the best offer immediately? Many deals are lost because buyer agents don’t bother to ask questions and talk with the listing agents; communication and understanding is critical.
Keep Contracts Clean and Simple
The buyer agent must understand how to write an effective offer, this is critical. The cleaner the better; avoid asking for nonsense and for things that can complicate the process. Keep time limits short; 5 days for due diligence and 21 days for financing. Give more than typical earnest money to show sincerity and limit stipulations in the offer; no stips are best. Be as flexible as possible with closing date, many times the seemingly little things make the difference. Escalation clauses are not welcomed by many sellers or agents. Again, it is critical for the buyer agent to understand those and be fully immersed and clear on what motivates the seller.
Don’t Get Cute
Some buyers and agents think it’s a good idea to run games to win a bidding war. A very common one is to just out bid everyone and let the appraisal come in low. The idea being that the seller will reduce to that number and the buyer will have paid “market” value. Another is the financing bait and switch. Cash offers or those with low loan amounts are accepted then suddenly the buyer decides to finance, increase the loan amount or convert to FHA/USDA. Don’t do this; it’s not smart and the seller may not accept the contract change. Honor the contract, nonsense like this never ends well and no responsible buyer agent should allow it. An experienced listing agent will flag something like that immediately and feel like they're being played.
A Buyer Letter - Don't
Many in the media and business suggest writing a personal “love letter” to the seller as a way to distinguish your offer. The idea being that pulling at the seller’s heart strings will emotionally motivate them to accept an offer that may be below others. Focus on winning the home by providing the best offer, letters should be avoided for several reasons. The main one is the Federal Fair Housing Act and the number of ways some/all parties might violate aspects of it. Telling a seller how much you “love” the home weakens your position during negotiation, as can any other information inadvertently shared. Leave letters alone; put the best offer on the table because that’s what matters.
Multiple offers can be very frustrating for home buyers, step back as much as possible and keep it all business. Work only with experienced agents, bid with your head, not over it and remember that sometimes you win by losing. Questions? Please drop us a line, we have decades of experience with multiple offers from both the buyer and seller side.
The Hank Miller Team puts 30+ years of full time sales & appraisal experience to work for you. Act with complete confidence & make sound, decisive real estate decisions. 678-428-8276 and email@example.com Posted by Hank Miller on