Which home buyer will win the bidding war?
If your home search takes you into a sought-after neighborhood (perhaps because of its great schools, or stellar commute location), or if there are many other buyers in your target price range, you may run into a situation in which you are competing with a number of other buyers to get the home. This is a “multiple offers” situation, and you’re going to need a strategy for coming out on top.
What prompts multiple offers?
Some new homes are priced right, have great amenities and are in a great location—meaning that a number of households just like yours are interested in the property and want to make it their own. In other cases, a home may be on the market for an extended period of time, and buyers may be swooping in hoping to catch a steal of a deal. Finally, some agents purposely price quality properties below market hoping that increased exposure and an ensuing bidding war will drive the sales price beyond what a market-based listing may have brought in.
Is winning out all about paying more?
In real estate, a seller is motivated to make the most money they can on their property, so having the highest bid is one way to take the home as a prize. However, it’s not always so cut and dry. Some sellers, for instance, may have hopes about the types of tenants that will take over their home (e.g., a young family with children instead of an investor), so your profile as a buyer can also be of leverage to you.
What do I need to do to win a multiple offer situation?
A lot depends upon your tenacity, your willingness to be flexible, and the capabilities of your real estate agent.
Here are some tips:
- If you can up your bid, do so, but stay within sane limits—you don’t want to grossly overpay.
- Let the seller know who you are, why you want to buy the house, and why you’d be the best new owner. One agent presented a slide show of the buyers to a seller, and her buyers won out over higher bids!
- Be clear with the seller that you won’t be putting demands on them, which can be common in a buyer’s market. Don’t strain the deal by focusing on small requests like fixing a screen door, or replacing a cracked window. Keeping the deal stress-free for the seller can differentiate you from a more demanding—but higher—bid.
- Be open to waiving some contingencies, but don’t get risky and waive the inspection contingency! You want to know exactly what you’re buying, or you should be moving on.
- Be clear about your ability to fund the purchase. You can even include, if you already have one, a pre-approval from your lender, which can show the sellers that the deal will be seamless, and won’t fall apart due to loan issuance problems.
What if I lose out to another offer?
This, unfortunately, is a real possibility, and is an example of why you shouldn’t get your heart too set on a home. If you can, take some time after the rejection of your offer to run through the experience with your agent, and discuss how you would do things differently if you had another chance. Losing out to another offer can be a painful and emotional experience, but it can also serve as a great learning experience for the next time that you find a house you love—only to find that a whole bunch of other buyers love it too!
image credit: http://leung.typepad.com
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