6 Home Buying Strategies for Winning a Bidding War
Trying to navigate the home buying process in a sellers’ market can be a challenge but it’s well worth it once you find your dream home. Before you sign on the dotted line and hand over a check, you have to get the seller to accept your offer, which can be tricky if the seller has more than one offer on the table. A seller getting multiple offers happens more frequently in a seller’s market when there are more buyers than sellers. It’s hard to lose the house to another buyer – especially after you’ve spent so much time looking for the perfect home.
Here are six ways to strengthen your position and increase the chances of having your offer accepted by the seller.
1. Submit a Larger Offer
If you know that others are interested in the house, you might need to go over the list price. Submitting an offer that’s too low is risky since the seller will most often select the highest offer. You may have to bid over the list price to ensure that your offer is competitive; just make sure you’re not offering more than you can afford or are comfortable paying.
2. Secure a Mortgage Pre-Approval Letter or Provide Proof of Funds
You can make as high an offer as you want, but it won’t matter to the seller unless you can secure a loan for that amount. This is why you should apply for a mortgage pre-approval before shopping for a home. A pre-approval letter confirms to the seller that you can secure the loan needed to match your offer. When it comes to choosing between two offers, most sellers will prefer the safe bet – even if they’re turning down a slightly larger offer – by selecting the buyer with the mortgage pre-approval.
If you’re paying cash, be prepared to provide proof that you have the funds to cover the amount of the sales price. This proof could be your bank statement, retirement account, or investment funds.
3. Put Down a Larger Earnest Deposit
Earnest money or good faith deposit is the money you will need to provide once your offer is accepted. It will be credited back to you at closing, but it is retained by the seller if you breach the contract. It shows that you’re a serious buyer. If the seller has to choose between more than one offer, they will consider the amount of your earnest money deposit. A larger amount shows that you’re more financially secure and have more skin in the game, making your offer seem like a safer option.
4. Remove Contingencies from Your Offer
Contingencies refer to the conditions that must be met to close the sale of the property. If the conditions aren’t satisfied, the buyer can cancel their offer without losing any money. You can waive certain contingencies to make your offer look more appealing. For example, you could waive the financing contingency, which states that you’ll only purchase the property if you can secure the loan.
5. Add an Escalation Clause
If you have the funds, consider adding an escalation clause. This states that you’re willing to go up by a specified increment up to a cap amount if another bidder matches or is higher than your initial offer. Adding such a clause helps you from overpaying, but gives you the chance to beat out other offers.
6. Know What Else Is Important to the Seller
Have your agent talk to the listing agent, or to the seller if it’s a For Sale By Owner, to find out what besides price is appealing to the seller. Do they want to close as soon as possible or prefer a few months to find their new home? Are they good with providing possession at closing or need a few days to move out, or do they need to rent the property back for a month? You can shorten the length of time for inspections and/or loan approval (provided you leave enough time to meet the deadlines). There are elements to the contract besides price that can be appealing to the seller and may tip the scales in your favor, even if your offer isn’t the highest price.
Becoming a homeowner is a dream come true for many, but in a sellers’ market, it can be frustrating when facing multiple offer situations. These are the six different tactics to make your offer more appealing to the seller, whether you decide to increase the amount of your bid or not.
Why Choose Summer House Realty
At Summer House Realty our experienced agents can help you navigate the purchase of any property. Our agents have years of experience in the local market and can help you better negotiate your position with the seller. If you are interested in purchasing a home in Florida or Georgia, contact Summer House Realty today for a free market analysis and buyer consultation.