Expert Tips: Winning a Bidding War
Winning a bidding war can often be an essential part of buying your dream home. Working with your realtor to create an attractive offer is critical to closing the deal. We asked the experts to share their best advice for winning a bidding war so you can focus on what’s really important — not to mention the stress of the inspection, closing, and moving process.
What’s your tip for mortgage preapproval or precommitment?
Don’t wait! You don’t want to have to rush through the pre-approval process after you’ve found the property you want. In the worst-case scenario you may find that you can’t qualify for the home that you already fell in love with. Even if you can qualify for the loan, you may find that the terms aren’t ideal because of issues with your credit, debt, etc. Many of these issues can be resolved with time and the right help so having a head start puts you in a better position for optimal terms like a low interest rate, more manageable monthly payments, etc. Regardless, getting pre-approved early reduces the overall stress of the process.
-Julie Aragon from Aragon Lending Team
What is an appraisal gap guarantee?
Offering an appraisal gap guarantee is simple. You can waive the appraisal contingency. Especially, in today market or early 2022 this was possibly the only way to win a bidding war. Sellers constantly have the uncertainty of what their home is worth or if it will appraise at contract price. For a buyer to waive appraisal it is a guarantee that regardless of what the home appraises at they will agree to pay the contracted price.
-Nico Jodin, CEO and Co-founder of Beycome
What is helpful to avoid common negotiation mistakes?
Be prepared and have the relevant information about the property on hand to back your negotiation. Negotiations must be clear between both parties and the final negotiated term must always be backed up in writing. It’s often helpful to negotiate verbally, usually via the seller’s estate agent, to reach a consensus on price before drawing up a final Offer to Purchase. This can save a lot of back-and-forth and unnecessary paperwork as long as everyone understands that – until it is written and signed by both parties – a verbal agreement isn’t binding on anyone.
-David Jacobs, Gauteng Regional Sales Manager for the Rawson Property Group
Is a lower cash offer without an escalation clause more attractive than one with an escalation clause?
Yes, a lower cash offer without an escalation clause might be more attractive than one with an escalation clause. A few years ago, escalation clauses were not that common. Still, in the past couple of years, with the market’s craziness (20 to 30 offers on some homes), many people used them, but the sentiment toward escalation clauses has changed. Many agents and sellers are not in favor of them now. For instance, what happens when 2 or 3 buyers put escalation clauses in? Escalation clauses can make a buyer appear sneaky to write an offer without revealing your real offer price. We are going into a much slower market, similar to pre-Covid, where homes sell in 3-6 months instead of a couple of weeks.
-Anthony from Amalfi Estates
Does it matter whether you bid with a round vs. odd number?
In a multiple-offer situation, the wise buyer AVOIDS a common or rounded number. Would you be shocked to know that it is common for offers to come in at identical amounts? I advise my buyers to raise their highest offer by $1,000 – $3,000. It amounts to nothing on the monthly payment, and it is often the reason my buyer’s offers are chosen. By standing out, even with just this small amount of money, we make the choice easy for the seller.
-Kendyl Young from Glendale Diggs
Can being flexible with the move-in date help you win a bidding war?
If you are a buyer, you have your needs for moving in. You also need to take into consideration what the seller needs, especially when there is a bidding war over the property. It could be that the seller is purchasing a house of their own to move into and need a few extra weeks to move all of their items to the new house.
When a seller is picking the right buyer for their house, they take into account their needs and if they can stay in the house a little longer in order to move. A tip to help you in this situation would be to offer the seller 2 weeks to stay in the house for free but, if it goes past that, then you start charging them rent just like if they were a tenant. That way, you are being helpful and flexible to the seller and protecting yourself from potential issues with sellers staying too long.
-Dustin Heiner from Master Passive Income
What is one tip for finding out what a seller wants?
I would say the one tip to find out what sellers want is to ask them what they don’t like. Asking what it is they don’t like reveals what trope of pain they would like to avoid.
Say for instance you’re asking what is that they don’t like about a certain vehicle and they reveal to you it doesn’t have heated seats or doesn’t have this type of convenience package, etc. So now you know those are things are important to them and what they want.
If you were to Parley that into a real estate experience, you would ask questions like what type of neighborhoods don’t you like or locations? They may answer I don’t like power lines. I don’t like corner houses don’t like being too far from shopping.
-Rob Campbell from iStagers.com