Real Estate Bidding War

Although the housing market remains active for both buying and selling, availability has remained a problem in recent years.

When there are a lot of buyers but not enough homes, there is a shortage of supply. Many refer to it as a “seller’s market,” since multiple buyers compete for the same land, resulting in a bidding war. Here’s how to get your dream home even though there’s a lot of competition.

The Anatomy of a Bidding War

In real estate, a bidding war arises when two or more parties fight to get their offer accepted by the seller. This stressful situation may be exacerbated if the seller or selling agent is aware of the high level of interest and suggests that everyone send a fresh, bigger, and better bid.

As a result, you’ve reached a bidding war.

It’s easy to get swept up in the excitement of outbidding your opponent, but it’s critical to keep an eye on your surroundings. You don’t want to sign a purchasing deal that you can’t afford just to beat out the competition’s bid.

That is why we advise you to apply for a mortgage first. You’ll not only know how much you qualify for right away, but you’ll also have a trusted loan specialist crunch the numbers for you, letting you know exactly how much your monthly payments will be. You’ll also know how much you can afford to pay with the help of your real estate agent.

However, this isn’t the only advantage of submitting earlier rather than later. Continue reading to learn more.

Get Pre-Approved For a Home Loan

When there are many offers on a single home, having a mortgage pre-approval is crucial. Pre-approval indicates that you already have the financial backing you say in your bid. It also means that you are able to continue with the transaction right away, rather than waiting for a bank to make a decision about your loan worthiness.

Pre-approval also ensures you’ll be able to bid with confidence. Shopping for a home is exhausting enough without having to think about a bidding war or making an offer without financial backing. Going in with a pre-approval for a home loan would give you (and the seller) more trust.

Drop Contingencies

Sellers who want to deal quickly want to stop as many roadblocks as possible. One method is to leave contingencies out of your deal. A seller’s worst fear is to go through all the steps of pushing a deal forward only to have to relist their home after the contingency deal falls through.

This can happen as a result of an appraisal contingency, which states that the lender would not pay more for a home than the appraised value. In a bidding war, however, you would have to go above and beyond the appraised value to win. Buyers can circumvent this by paying the difference. You may, for example, make a bid based on the appraisal price plus $5,000.

Only keep in mind that you are responsible for the difference. The lender can only pay up to the property’s appraised value.

The home inspection contingency is another contingency that some buyers waive. Some people choose to forego an inspection altogether, while others opt for one to be informed of potential problems but not to make the sale based on the results.

Be Flexible

Sellers who are motivated appreciate the ability to change their minds. A seller, for example, may wish to postpone the closing date in order to allow their children to finish the school year before moving. Others might feel compelled to relocate as soon as possible because they have a job offer in a new city.

Whatever the case may be, many sellers find the opportunity to be versatile in these circumstances to be a huge plus.

Next Steps

You can use these tactics to bring your offer to the top of the heap now that you know how a bidding war works. Are you ready to take the lead? Begin by contacting us to get pre-approved for a home loan.