Four Strategies to Avoid Getting Stuck in a “Bidding War”

More often in today’s real estate market, buyers find themselves in an all-out ‘Offer Competition’ when trying to buy their dream home.  They have already done their homework by getting pre-approved, determining what neighborhood they want to live in, and what type of home appeals to them.  But now are staring down 3 or 4 other buyers who are determined to buy the same home.

While offering the most money might seem like the obvious way to win a bidding war, thankfully sellers don’t always choose the highest offer. There are situations where sellers might prefer offers that stand a greater chance of closing and/or that meet some of their other non-financial “needs”.

If you find yourself in an “Offer Competition” here are some tips to increase your chances of winning without adding to the price:

  1. As suggested above, have your lender pre-approve you BEFORE you look for a home, which is almost always required by any good Realtor these days.  You will immediately be ready to make an eye-catching offer to the sellers; one with a very comforting pre-approval letter attached.
  2. Choose a bank whose pre-approval letters are known to be unfailing.  Unbelievably not all pre-approval letters are actually based on the borrowers’ ability to get a loan!  Ask your realtor if your bank is known for issuing trustworthy pre-approval letters, or if it gives a pre-approval letter to anyone that can fog the proverbial mirror.  Further, a Seller often prefers to see a letter these days from a local lender like Great Midwest, as the national banks have had difficulty meeting closing deadlines in many circumstances.
  3. Cash is King. Some buyers are comforted to see a buyer put down a meaningful earnest money deposit.  If you have the cash, consider putting down a larger than normal earnest money deposit.  Which buyer appears most sincere to the seller – the one who offers an earnest money deposit of $500 or the one who offers $5,000?
  4. Meet the sellers “needs”.  You already have your pre-approval letter to
    show the seller you’re serious, so now make your offer irresistible by meeting
    some other undisclosed “need”.  Have your realtor ask if the sellers need a quick close, or if they would like an extra 15-30 days to move out after closing.  That
    might be enough to tip the scales in your favor.

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Posted by John Schroder NMLS ID #967896

 

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