When battling to buy a home, it may seem like an episode of “Game of Thrones” and you are fighting other buyer’s for rights to a castle. Sometimes these wars can even break out into a buyer’s market.
When you have your heart set on a home it can be discouraging to hear multiple offers coming in on the property. Now is the time to suit up and prepare for a bidding war in order to defeat these other potential buyers.
These are six strategies to help you on your noble quest:
1. Avoid a war if you can
The easiest way to win a bidding war is to make sure there isn’t one in the first place.
This can be accomplished by asking your broker if the seller has a price in mind that would be bold and detaining enough to halt any potential conflict.
Tracey Hampson, who is a real estate agent at Realty One Group in Valencia, CA, says this is a strategy that has worked very well for her. “I always like to speak with the listing agent and simply ask what’s important to the sellers,” she says. For example, they may need a 45-day escrow or want to keep the washer and dryer. It doesn’t always have to be a difficult feat.
2. Have a pre-approval letter
In the case that you cannot avoid a bidding war, you may need to break out your secret weapon: a pre-approval letter.
This is not the same as a pre-qualification letter. This type of letter does not offer much buyer power as it is just stating that your creditworthiness has been evaluated by a lender and they think you may be a good candidate for a loan.
A pre-approval letter also comes from a lender but is evaluated based upon all your credit and asset information that is pulled by an underwriter. They then qualify you for a specific loan amount, and this is typically stated on letterhead as well.
This letter signifies that you are a trustworthy buyer and can greatly increase your chances of having your offer chosen.
3. Make it rain
A cash offer usually holds the most weight in a bidding war. Not everyone can afford to pay cash, so if this is the case, make your down payment as large as you can. This shows your seriousness and ability to afford the property.
A third option is to offer a higher escrow deposit. These deposits are usually 10% but a lot of buyers can afford to put more on the line. This strategy lessens the risk to the seller on the playing field and increases the buyer’s risk since they have more to lose now.
And if you are absolutely set on the property, a sure-fire way to win a bidding war is to offer above the asking price. This works best when offering slightly above an even number. For example, if the asking price is $200,000, try offering $204,350 instead of $204,000.
4. Squash contingency timelines
A contingency period allows the buyer to back out of the contract for many reasons. If the seller is looking to close the deal rather quickly, you could appeal to this desire by reducing the contingency period timeline.
The inspection contingency is a great place to start. This period of time is typically 17 days, so try reducing it to 5 days.
Make sure to also include the minimum number of contingencies in your offer. Do not include what you absolutely do not need. These include contingencies such as home improvements or requiring that you sell your home first before closing on the offer. If the seller wants to take a fixture or appliance with them, let them. You can always replace those items.
5. Hire an experienced agent
Make sure to choose your agent wisely and do your research when looking through reviews of local agents. You want to pick an agent who has been through this many times before and has always come out on top. Search for a realtor now in your area.
6. Write a personal letter
Opinions vary on if this technique is useful or not. It all depends on your buying agent.
If you write about how much you love the property and pay several compliments to the owners on their home, you could take a serious advantage on the battlefield. A letter can help you stand out in the crowd of offers but be sure to make the letter as sincere as possible.