How to Win a Bidding War
Competition amongst interested bidders may occur even in a real estate market that is in balance, so how can you make your offer stand out above the rest? Strong pricing is an apparent strategy, but there are a few other trade secrets that can turn your offer into the eye-catching, irresistible proposition that no seller can refuse.
Dates and Deadlines
Whether it’s a quick close, an extended occupancy, or any other scheduling requirement, sellers often have their eye on a specific closing date—and if you can meet that date, your flexibility may be as good as a higher-priced offer. For example, some sellers put a premium on a post-closing occupancy situation. If the sellers need to stay in the house past the closing date—and this agreement works for you—your willingness may be more enticing to the seller than cold, hard cash.Sellers frequently have a specific closing date in mind, whether it be a rapid close, a prolonged occupancy, or any other scheduling condition. If you can meet that date, your flexibility may be as good as a higher-priced offer. For instance, some sellers place a premium on occupancy following the transaction. If this agreement works for you and the sellers need to remain in the property after the closing date, the seller may find your willingness more appealing than a lump sum of cash.
Additional Earnest Money
Even though it’s a straightforward idea, many purchasers don’t take it into account: providing additional earnest money. Not only does it demonstrate your passion, but it also suggests you have a large amount of cash on hand, which could allay the sellers’ worries over your financial qualifications.
The three main obstacles that must be overcome during the purchasing process are inspections, appraisals, and loan requirements. If you can get rid of any or all of these, your offer will be substantially stronger.
Let’s talk about the main topic first: the inspection. In general, it’s not a good idea to remove the inspection condition from an offer; picture finding out after the closing that the house has a broken HVAC system, a leaky roof, or an unidentified foundation problem. However, this possibility is infrequently waived. Even if you are confident in the condition of the house, you can still ask for an inspection. Be sure to inform the seller that you are doing it only for your own information and that you have no plans to renegotiate the price.
There are various approaches to handle the appraisal. Remove the appraisal contingency if you’re not worried about the house measuring up to the appraised value or if you have the cash on hand to offer a larger down payment. You can still say that you won’t object to the appraisal if it meets a certain threshold even if your down payment is low. This strategy provides a safety net in the event that the house appraises for much less than anticipated and works effectively for both the buyer and the seller.
Last but not least, financing requirements may raise a red flag for sellers even though they are beneficial for buyer protection. Buyers are shielded from unforeseen financial difficulties under these terms. They are frequently planned close to closing, though, so sellers may view them as a danger and potential time-waster if the purchase goes through. If this barrier is removed, your offer becomes as good as cash if you are completely confident in your financial situation and have undergone a rigorous lending process.
I’ve said it before: the main impetus behind a solid offer is a strong price. Even if you are confident in your own offer, you cannot be certain of how it will fare against competing offers. (Cue the nerves worthy of Vegas!)
Escalation clauses are a growing trend in contracts. Here, the buyer submits an offer but also promises to outbid rival offers by a specified margin, up to a predetermined price. It’s a clever tactic that demonstrates the seller’s keen interest, but it’s crucial to keep within your means—and your comfort zone—and to know when to back down if the offer exceeds it. ‘Buyer is willing to pay $500,000 or $5,000 over any rival offer up to $525,000’ might serve as a simple illustration. These provisions mandate that the competitive offer be delivered to the escalating buyer with all personally identifying information removed.
The greatest choice you can make, however, is to work with a knowledgeable real estate agent to assist you throughout the purchasing process rather than adding any clauses or contingencies. An advocate who is intimately familiar with the regional market and who can help you navigate difficult negotiations gives you a competitive advantage.