Multiple Offer situations are returning to many Markets in the United States. If you foresee a Bidding War in your future, Broker Associate Dale Corpus offers valuable tips to help you prepare for the Competition!
How to Get Your Offer Accepted in a Bidding War
Believe it or not starting to see the market turnaround with a vengeance especially in the Tri-Valley and Contra Costa County. People have money and they're willing to spend a lot of it on homes in this area. So how can a first-time buyer or even your typical home buyer compete with these cash offers from investors with two or three escalation clauses? What do buyers do when they find themselves in a bidding war?
First things first; buyers need to recognize that they are in a market that is entertaining bidding wars. Just being familiar with the property values and the neighborhoods can give buyers a head start in knowing how to compete with cash offers. Although it may sound counter intuitive, sellers may not often prefer the highest bid. They are looking however, for an offer that meets their criteria and their conditions over simply the highest bid.
If you’re thinking a bidding war may be foreseeable in your future here are some tips to keep in mind to prepare yourself for the competition.
If you’re applying for financing make sure your lender is easily available at a moment’s notice. Have everything prepared including a preapproval letter and any financial documents you may need to seal the deal quickly.
Be ready to make an offer and personalize it. See the home the day goes on the market so that you can move quickly. Talk to the listing agent or have your buyer’s agent communicate what the sellers looking for. Be personalized, write a letter, or specifically tailor your offer to what the seller needs.
Have your inspection ready to go. Although most homes should require an inspection, having that extra contingency over offers that may ignore it can be a deterrent. One loophole is to have an inspection done after your offer has been accepted or ask for an inspection before making an offer although this requires an inspector on speed dial and on-call.
Reduce or eliminate any contingencies. Sellers don’t want a lot of conditions on the buyer’s side for the sale of the property. They want to know that it can be sold and closed on time without the need to sell another property, appraisal coming in wrong, financing, home inspection, or feasibility contingency. Limit your contingencies as much is possible to appeal to the seller’s motivation.
Consider an escalation clause. An escalation clause is an addendum to the purchase and sale agreement that authorizes your buyer’s agent to bump up the selling price of the home in certain increments over someone else’s bid. Use these cautiously though, as you don’t want to overpay for the home or be stuck with a home that doesn’t meet appraisal.
Remember, most sellers have been on the buyer’s side. Appeal to their human nature especially if you’re looking for an owner/occupied home for your family. Knowing the seller, their conditions, and motivation is all key to writing up a custom tailored offer designed with the seller in mind.
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Disclaimer: Nothing in the above blog article is to be construed as legal advice, tax advice, or financial advice. For legal advice see an attorney. For tax advice or financial advice see a tax attorney, certified public accountant, or other qualified professional.