A bidding war can arise when the real estate market is oversaturated with inventory, so much so that multiple buyers are clamoring over one property. Avoiding a bidding war under current market conditions will be tough. Buyers right now are in a precarious position, as the sellers are the ones holding all the cards.
It’s a seller’s market right now, but back in the days when buyers were calling all the shots, all they had to do was submit an offer, often times under asking, and were pretty much assured they would get it if their offer was attractive. Nowadays, with 20, 40, 50 offers being submitted on one property, you have to make sure yours tops the list. That’s a tall order – especially when you don’t have extra cash to entice the sellers, or are not willing to waive contingencies such as home appraisals and inspections.
So what can you do to avoid a bidding war when buying a home? Here are some tips.
Get a Preapproval Letter
Don’t even start looking for a house unless you have this letter in hand. Houses go fast, so if you see something you like, you need to put in an offer fast. Having a preapproval letter at the ready not only tells you what the bank thinks you can afford, but it also shows the seller you’re a serious buyer.
Make the Highest Offer
This is tough to know, as the seller’s agent isn’t going to advertise the highest offer they have in hand. Don’t ignore your budget, though. Stick to what you can afford because if your offer is actually chosen, you will need to be ready to go. Ask your agent what the highest offer you can reasonably make would be. They will know how competitively priced the home is and how many people in general are itching to win it.
Add an Escalation Clause
It’s a gamble any time you submit an offer on a home. You don’t want to overpay, but you don’t want to lose your dream home over a few thousand bucks. An escalation clause will allow you to put in a higher offer only if facing competition on the price. This clause essentially says you’re willing to pay a certain dollar amount above anyone else’s offer.
Write a Letter to the Sellers
If you can see yourself living in the home and raising your kids there, write a letter to the sellers outlining just how wonderful that dream is to you. Many sellers are happy knowing their home is going to go to another family who will love it as much as they did. Appeal to their emotional side. It may give you a leg up over the competition. But it doesn’t always work. Usually, money talks. So if you submit a letter but another buyer submits no letter and a higher offer with no contingencies, guess who will probably win out?
If you can offer cash for the home, do it. This will ensure a quicker closing due to the lack of a lengthy underwriting process involved.
Waive All Contingencies
A few years ago, it was unheard of for buyers to waive contingencies like appraisals and inspections. But in today’s market, you will likely not be considered if you don’t waive them. You will still have to have the appraisal done due to lender requirements, but it will be for your purposes only. You can choose to have an inspection on your own or not.
Inspections uncover issues in properties that can slow down the closing process. Sellers want to move quickly and they don’t want to have to perform expensive repairs. Waiving contingencies will make you very attractive in their eyes.
By doing all of the above, you may still end up in a bidding war. Nothing is guaranteed in this market!
Contact Berkshire Hathaway Premier Properties
Connect with one of our experienced buyers’ agents when you contact Berkshire Hathaway Premier Properties today at 713-862-0000. We can let you in on some secrets to avoiding a bidding war on a property you may have your eye on.