The real estate landscape over the last couple of years has been nothing short of amazing for home sellers. In most areas of the US, there have been bidding wars on nearly every house that hits the market. For buyers, it has been excruciating. For sellers, it has been a dream come true.
With so few homes for sale, buyers are fighting over each property that hits the market. Imagine sitting on your computer looking at homes on one of the more popular home listing websites. You find one that checks all the boxes for what you're looking for.
The call is made to your real estate agent within 30 minutes of seeing the home pop up online and you schedule a showing immediately. Within a couple of hours, you have looked at the home and are ready to make a bid. You submit your offer only to be told there are ten other buyers who will be submitting an offer as well.
Welcome to the home buying nightmare of the last few years. Some buyers have been beaten out by other buyers on dozens of homes. Writing offers over and over again only to lose sends your anxiety and disappointment levels off the charts.
Understanding how to win a bidding war on a house could be your ticket to success. Maybe you have not pulled out all the stops? Let's look at some of the best tips for winning a bidding war.
It goes without saying that offering the most money on a house goes a long way. We don't need to emphasize that for winning a bidding war as it is common sense.
Paying cash is another tip that may be out of reach for most buyers. If you have it though by all means use this as a tool for success if possible. Here are some of the things you may be able to do to land the next house you love.
All of these things will increase your chances of getting the house you love.
In life, you sometimes have to gamble to get what you want. We see this all the time with people who play the lottery. We all want to be rich, so we spend countless money trying to win, even though the chances are low that it will happen.
Waiving a home inspection is somewhat of a gamble but the odds you're buying a home with some catastrophic problem is low. Most homes don't have problems significant enough that you would walk away completely from the transaction.
You may get stuck with a few minor problems you didn't expect. If you have been in numerous bidding wars and continue to lose out, one of the significant factors is probably other buyers forgoing the inspection.
Consider doing the same with your next offer. Just be sure to look over the home extra carefully before submitting your offer.
With bidding wars, homes are selling in far excess of their asking prices. Sometimes homes are selling for more than $100,000 over the list price. When prices are going so far over asking there is bound to be appraisal issues.
One of the reasons a cash offer is so appealing is because a seller doesn't have to worry about appraisal issues. One of the ways you can level the playing field is by waiving your real estate appraisal. You are essentially telling the seller that in the event the appraisal comes in low, you will do what it takes to satisfy the mortgage lender.
In instances such as this where an appraisal comes in low, a buyer will increase their down payment to provide more equity in the home.
When a buyer doesn't want to be on the hook for a significant disparity between the purchase price and appraised value, they can offer an appraisal gap clause instead. The appraisal gap clause will guarantee to cover a low appraisal up to a specified amount,
Adding an escalation clause to your offer can help with winning a bidding war on a house. An escalation clause states you agree to trump any other offers on a home by a specified amount of money. You are also able to put a cap price on what you'll end up paying for the home.
An escalation clause lets the seller know you really want their home badly. When you are in a spot where you need to provide your best offer, an escalation clause lets you put your best foot forward.
It is essential when adding an escalation clause that you make it worthwhile for a seller to accept. The amount you set as what you agree to beat another offer by is crucial. Adding an escalation clause that says you will beat another offer by $1000 isn't going to cut it.
Your escalator should be something meaningful to a seller. I would suggest that $5000 would be a good amount to make your offer worthy of choosing. There could be terms in another offer that are attractive enough that $1000 would not make a difference to a seller.
Joe Boylan of Springs Homes talks about how to use an escalation clause in an offer.
If you truly love a home and are a gambler, removing your financing contingency is the way to go. Doing so is a lot riskier than waiving a home inspection.
You need to be one hundred percent sure you'll get the mortgage. Without the mortgage contingency clause to fall back on, you would be at risk of losing your earnest money deposit.
Earnest money can be five percent of the purchase price and in some circumstances even more. Removing the financing contingency is similar to offering cash, so it is extremely appealing to a seller. It is one of the most common contingencies, so when it is removed it's a significant PLUS!
In most real estate contracts, one of the most important terms to a seller is usually the closing date. It is vital to find out when the seller wants to close and give them their desired date.
Sometimes a seller has not found a home to purchase yet. If you are in a position to do so, offering them the ability to rent back the home for a certain amount of time could put your offer over the top.
Buying and selling a home is often difficult in terms of timing. Rent back agreements can be super attractive.
Follow these tips and you will be well on your way to winning a bidding war on a house. Sometimes to come out on top you need to be patient. Remember every dog has his day. Eventually it will be your turn to be the one who has the accepted offer.