You’ve probably heard there have been a lot of bidding wars in the real estate market over the last few years. This is because there have been multiple periods where demand was much higher than supply, leading to bidding wars on the best homes for sale. We want to give you the inside scoop and help you understand what it takes to win one.
What is a Bidding War?
A bidding war in the real estate market is when two or more homebuyers compete against each other with increasing bids to purchase the home. For example, homebuyer A might bid $300K, and homebuyer B may say they can do $289K. If the seller’s agent lets homebuyer B know they have the lower bid, they may raise it to compete and try to win the home. The exciting thing is that there’s more to this game than just having the highest price. So let’s look at a few other things the seller will consider.
Factors Involved in Bidding Wars
When a seller is deciding which bid they want to accept, they consider more than just the price. Here are a few things they’ll weigh during the decision: Pre-approval letter – does the buyer have a letter from a bank proving they’ve been approved for that mortgage? This means the sale is more likely to go through. Cash offer – is the buyer saying they can buy the home with cash without even needing a mortgage? This means the sale can move quickly and is even more secure than the pre-approval letter. Contingencies – what are the buyers saying regarding contingencies? Does one waive contingencies, but the other doesn’t? Escalation Clause – This document states you’re willing to increase your bid by a certain amount if a competing bidder matches your price. Personal letter – both buyers and sellers are humans. They have likes and dislikes, feelings, and emotions. Sometimes a buyer’s personal letter, talking about how much they love the home and imagining where their things would go, can turn the tide. Why are these important? Because they help outline your chess pieces. Winning a bidding war is more like chess than checkers! It’s not just about price – it’s about using everything at your disposal, including the things we’ve outlined above.
How to Win a Bidding War
Let’s say you’re in a situation where you are expecting a bidding war. In that case, we have a few recommendations to help you win the bid.
- Work with the best loan officer you can find to help guide you through the process
- Have your pre-approval letter ready to go before you bid
- Consider being flexible on contingencies – you may need to waive them to be competitive, depending on the home and market
- Include an escalation clause to help the seller know you’re serious
- Write a personal letter – it doesn’t take much time but can be “the straw that breaks the camel’s back”
While nothing is guaranteed, doing these will go a long way toward helping you buy that home you’re so excited about.
Conclusion
Do you have any other questions about bidding wars in the real estate market or buying a home in general? Give us a call or email us at info@robertcoomergroup.com, and we’ll be in touch soon! If you have any questions or would like help comparing loan options, our team at the RCG Home Loans would be happy to assist you. Contact us today to get started!