One of the biggest real estate stories nationwide is the lack of inventory in the housing market. The number of homes listed for sale continues to steadily decline to levels not seen in years, with strong contract activity pushing supply even lower. That means increased competition for home buyers, and in many cases, bidding wars.
What should you do if you find yourself in a bidding war? Here are a few tips for buyers and sellers.
Start with your best offer. If you know you’re going into a multiple bid scenario, write your best offer from the start.
Earnest money can make a difference. Increase your earnest money deposit to show the seller you are serious about closing and will not back out of the transaction.
Pre-approval is a must. A mortgage pre-approval (or proof of funds for cash buyers) is a necessity. Shopping for a home without pre-approval is an exercise in futility in today’s market.
Find out what's important to the seller. Ask your broker to find out the seller’s hot buttons in the transaction. Maybe they’re willing to accept a slightly lower price for a fast closing or an “as-is” contract.
Waive contingencies. Depending on the condition of the home, your finances and/or the state of your local market, it may make sense to waive certain contingencies, such as a home inspection or mortgage financing.
The highest offer isn’t always the best offer. After enduring years of falling home prices, it’s tempting to accept the highest bid. But these days you also need to take a hard look at a buyer’s ability to close. Weigh factors such as finance contingencies, earnest money and closing date. In the end, choosing the right buyer is just as important as choosing the right price.
Move quickly. While the market is heating up early, it’s still fickle.Respond to offers quickly, and once the terms are to your liking, get a contract signed ASAP. The longer a negotiation drags on, the more tenuous it becomes.
Maintain your objectives. Sure, all things being equal, you’ll take the highest price you can get. But if your target price was “X”, don’t all of a sudden set a new target of “X plus Y”. Stick to your game plan, and be happy when it succeeds.
Foster a feeling of equity in negotiations. A person is likely to walk away from a negotiation when they feel they’ve lost control. This is important to remember, even in multiple-offer situations. While you may have the leverage, it’s important to keep a buyer engaged and avoid ultimatums.
About the author: Peter Olesker works with @properties, a Chicago real estate brokerage dedicated to providing expert, quality advice and service for all of your real estate transactions. Leaders in state-of-the-art technology and marketing, @properties offers a higher level of service and professionalism for clients. For more information visit: www.atproperties.com.