handshake on offer

Making an Offer? Tips on How to Win in a Bidding War

As inventory continues to drop and mortgage rates continuously hit record-lows, if you’re looking to buy a home, the offer needs to stand out. If you find yourself in a bidding war, here are some tips on how you can win.

Many home buyers in recent months had to beat the competition to nail the house they wanted. Consequently, the question for buyers is not just how much to offer on a house they like, it’s how can they make the offer stand out from that of anyone else who has an eye on the same place. Here’s a some tips:

  • Start to line up all the professionals you will need early in your home search. Beside an agent experienced in dealing with multiple offers, you’ll need to have a lender, home inspector, and perhaps an attorney ready to go at a moment’s notice. The earliest bird sometimes captures the prize.
  • Secure a lender’s pre-approval for the maximum amount you can borrow, than by adding in the cash you have for a down payment, will give you an idea how high you can bid. This is not the same as being pre-qualified, which tells you only that you can qualify for financing. A pre-approval means that as long as the house appraises for the amount you want to finance, you are good to go.
  • Offer to pay all cash if you can. Even though sellers get all their money at closing whether you pay cash or secure financing, cash offers are like gold because they mean nothing can or will go wrong with your financing. There are loan programs that allow cash buyers to refinance their deals within six months of closing, so you can replenish, at least in part, whatever source you used for the money at little expense.
  • The cleanest offer often wins the day. That means no contingencies, or at least as few as possible. So don’t make your offer subject to selling your current house or breaking your lease. And don’t make it subject to securing financing. That should have been taken care of in advance.

What You Can and Can’t Waive

  • You can’t waive the appraisal. Lenders require one to make sure they are not lending more than the place is worth, but you can pick up any difference with a larger down payment. For example, if you offer $500,000 and the place is appraised at $490,000, your down payment will be $10,000 larger. But as a protection, make sure you put a limit on the extra amount. Otherwise, this idea can get very expensive.
  • Some people will waive the home inspection contingency, but think twice about doing that. Some sellers don’t like the idea of taking their homes off the market until the inspection takes place and you are satisfied with it. But if you forego this important protection, you are taking the chance that the roof is not on its last legs or the HVAC system is about to crap out.
  • One compromise is to promise to have the inspector examine the house and file his report within seven days. Here, you can stipulate that if you miss the deadline, you’re all in, no ifs, ands or buts. You also might want to agree that only major issues costing more than X amount – say $5,000 – will be deal breakers. Otherwise, you’ll take care of the little things after you move in.

Other Ways to Differentiate Your Offer

  • Attach a large earnest money check to your offer. The larger, the better because it again shows the seller just how serious you are and that you have the financial wherewithal to follow through. Your money should be safe because the seller’s agent is obligated by law to place it into a separate escrow account to be applied as part of your down payment at closing. Realize, though, that if the deal falls through and you are at fault, the seller could claim your deposit.
  • Speaking of attachments, consider writing a heartfelt letter about how wonderful you find the house and how you and your children plan to cherish and take care of it just like the seller obviously has. Corny? Sure. But more than a few deals have been sealed because a sentimental seller failed to see the sale as a business deal and nothing else. So write it by hand, and attach a sweet photo of your darling little ones.

If you should be beaten out by someone else, don’t despair. Ask that your contract be held as a backup just in case the offer that was accepted falls through. More than one in four contracts never make it to the closing table, so you could be next in line.

Looking to Buy?

If you’re interested in buying a home or the idea has crossed your mind and you’re looking for next steps, contact John Register for all your Outer Bank real estate needs.

Posted in Buying A Home, Real Estate, Tips

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