Whether you are a home buyer or a seller chances are you have come across a bidding war or two? If not, then maybe you have heard of others who have and recognize that these battles can be emotionally draining.
As an agent I have placed many offers since the beginning of the year and 100% of all these offers have been bidding wars.
But that is changing and more and more people having to make a decision as to whether or not they want to participate.
So here are some things to consider if you are trying to decide on whether or not you want to engage in a bidding war
Bidding wars tend to occur when there are too many buyers and not enough inventory. There are of course other factors that come into play such as:
Condition of Home
If there are other bids out there you need to try and figure that out
Keep in mind that there are sellers out there that do not want their agent to disclose this though. I, for one, do not understand why though.
Sometimes the seller is going to not negotiate and just take the highest and best offer. Believe it or not not all sellers want to play the negotiation game. It is stressful.
Make sure all your ducks are in a row.
Presenting your offer with your proof of funds and/or pre-approval is expected. Placing an offer without this and you will find your offer will not stand.
If there is a deadline to submit an offer (your agent will know) then you really can't wait. Submit it on time.
To show your motivation and eagerness to move forward present all you can. For instance if you have your attorney lined up let it be known. Same goes for inspector and so forth. This may not seem like a big deal to a buyer but to a seller it may show motivation and eagerness to move forward.
Present a cover letter. If you find multiple bids coming in before or after your bid it may not hurt to place the offer with a cover letter complementing the home, neighborhood, and listing agent. And be sure to tell the seller why the home is perfect for you and your family. You never know.
Try to find out if the seller has any requests with offers coming in
Is there a particular format that the seller or the listing agent expects? If so, submit the offer in that format.
And find out if there are any other triggers that could help or hurt your offer. For instance if you know you are flexible in the move in date see if it matters to the seller.
Right now the market is tight.
If your real estate agent told you the home is priced right then don't place a low ball offer. Especially when multiple offers exist.
Perhaps think about bidding $1, $100, or $1000 above asking. Sometimes this helps when the seller is not going to negotiate and decides to take the highest and best offer.
Its not always about the highest offer
You may be surprised to learn that it is not always about placing the highest offer. Sometimes an offer with impressive terms is more attractive.
For instance, putting more money down provides a seller with peace of mind. It shows the seller that the buyer is not likely to walk away from the transaction for fear of losing their downpayment.
If you are flexible with the move-in date you may find yourself ahead of the other bidders. Sometimes sellers can't move right away and need buyers that are more flexible. You could always allow them to stay an extra month or two or work out a rental plan for them.
One term, that I personally have not used, but I have seen with other agents in play is placing an escalation clause where the buyer says "I will outbid the highest offer by $1,000, $5,000, or $10,000." And remember to place a cap. Otherwise you will risk paying a crazy price you did not foresee.
And another option for buyers, which is risky is forgoing an inspection. I do always warn buyers of this but there are buyers who know the risk and willing to take it. A home inspection is recommended though. It can help a buyer avoid a financial headache if there are major problems in the home that are hidden or out of sight that an inspector would have seen.
So if you are a buyer and find yourself in this situation just try not to get too emotional in the process. Until you go to contract a buyer can swoop in and take the home from you if they outbid you or offer something with nice terms that the seller can't refuse. This can happen even after you do your inspection. And even when you go into contract anything can happen. You have to get past things like the appraisal, possible re-negotiations, the title search and more.
I always tell my buyers and sellers that until you are at closing nothing is for sure. A buyer may not get the loan even after the mortgage company swore the borrower would and the buyer may discover the via a title search hidden liens that were not known before.
It is important to stay level headed throughout the purchasing process.
J. Philip Real Estate is Westchester & Putnam's premier independent brokerage. Founded in 2005, the firm has grown from a single broker to a strong organization of well over 80 associates despite the housing downturn. The team's commitment to results and client advocacy, as well as our focus on technology and innovation, have positioned us as the "go to" brokerage for area buyers and sellers.