you keep losing in bidding wars due to multiple offers? Low inventory in a
sellers’ market can be difficult for buyers and knowing how to position
yourself is key to buying the home of your dreams.
Be a stronger buyer with this advice.
Hire an Experienced REALTOR®
An experienced agent can help you gain the upper hand as you navigate a multiple offer bidding war.
Multiple offer scenario requires mortgage financing in place
Hire a mortgage broker and get pre-approved for a mortgage loan. You may have heard the terms pre–qualification vs pre-approval and are unclear of the difference. A pre-qualification can be a good starting point to shop mortgages without having your credit pulled and get your documentation together.
You will have a commitment letter to attach to the offer signifying you are
pre-approved to obtain home financing. A commitment letter will set you apart
from other offers a seller may be considering. Having this legwork completed up
front will simplify the mortgage process, close on the home faster and reduce
last minute surprises.
Up your earnest money deposit. This shows a seller you are serious and will not walk away if a better property comes along.
If you are looking to buy a home in a sellers’ market, it is key to sell your home before buying. Having a contract with a contingency to sell your home will put you on the bottom of the pile in a multiple offer scenario. With multiple offers there is little chance a seller entertains contracts with a clause contingent on the sale of your house. Sellers will not likely be willing to wait for you to sell your home with other stronger offers on the table even if your offer is higher.
Shorten all your time frames for home inspections, mortgage commitment, appraisal contingency dates, and closing dates. Working with the seller to meet their time frames for moving will be a benefit.
Offer over asking with an Escalation Clause when there are multiple offers
When in a multiple offer situation homes can go for thousands over the asking price. Maybe you are willing to pay more but you are concerned the home will not appraise preventing you from obtaining a mortgage. Your realtor and mortgage broker will be able to help with this. Putting more money down upfront might be the solution.
Many buyers use an escalation clause that says you are willing to outbid any other offers on the home by a certain amount, up to a certain price which is the most you are willing to pay. This puts a cap on price. An escalation clause protects you financially because it prevents you from paying more than you need to.
Cash is King
Cash is king and in a sellers’ market many sellers will only entertain cash offers. Many buyers will borrow against their 401k or withdraw from their IRA. Some use a bridge loan or an existing home equity line of credit. A cash offer eliminates the need for an appraisal and bank approval for a loan contingency. A cash offer shows the seller you are serious about the house and ready to buy it today.
Real estate agents will most likely tell you not to remove contingencies. This tactic can move you to the top of the pile of multiple offers but be aware of the risks you take by buying a home without doing home inspections which can cost you later if there are structural, safety or mechanical issues with the home.
Write a Personal Letter
It is possible to tip the scales with the seller by writing a sincere
expression of how much you love the house, and how you can see you and your
family living there happily for many years. Homes hold many memories, and it is
often very difficult for sellers to move on.
It is important to sellers that someone will love and care for the home they raised a family in. In a bidding war a personal letter could earn you enough goodwill to move you to the front of the pack.
a Strong Contract that Appeals to Sellers
Another angle to simply come in with the best possible offer you can reasonably afford, one that still meets all the other parameters. Then live with it whether you win or lose the house.