Today’s housing market is tough – many potential sellers are feeling uncertain about listing, while buyers are motivated to look for new homes. With limited inventory and a surplus of buyers, it can often lead to a multiple bidding situation.
Whether it’s your first home or your fifth, one of the most challenging parts of the home buying process is a multi-offer situation or bidding war. While it can be stressful, there are some things you should consider, should you find yourself in the midst of a bidding war.
- Know what you can afford. Buying a house is an emotional process, add in bidding against other buyers, and it’s a whole new ball game. It’s important to know your numbers and the maximum amount you can afford. If you’ve already offered your maximum budget, then you need to be prepared to walk away.
- Always get pre-approved. At the end of the day, the seller needs to know that the sale is going to go through. You may have only requested to be pre-approved for a set amount, but if you know you can afford more and the bank agrees, request that your bank updates your pre-approval letter with the higher amount. Having it specific to the property you want to buy is always helpful too.
- Consider increasing your down payment or earnest money. A higher down payment or earnest money deposit shows the seller you are serious. If a bidding war is pushing the selling price above the estimated appraised value, a high down payment will be more attractive to the seller because it could mean less issues with getting a mortgage. Putting more down as earnest money is another strong way to reinforce interest. Just make sure you understand what an earnest money deposit is and avoid losing it – Read More Here.
- Offer a higher price or over asking. Yes, we all want to get the best deal when it comes to real estate but in a very hot and competitive market with low inventory, you may have to pay more than you originally wanted. Of course, you need to make sure you can afford it, but often even offering a few thousand dollars more than you may have originally could go a long way.
- Act quickly. In a seller’s market, you’ll need to be able to act fast. If you like a home and want to make an offer, do so expeditiously. Have a conversation with your Realtor so they know your max bid and have them ready to execute any counteroffers or changes quickly. Also, expediting any inspections can show the seller you are serious. If an offer is rejected and you have a back up house, be prepared to submit offers quickly on those as well.
- Consider waiving contingencies. This is not something that your Realtor or Lender would typically advise, but in an extreme situation, it could give you an advantage. Contingencies give the buyer the ability to back out of the offer should there be inspection issues, finance issues, or renegotiations. It’s a risk you’ll need to decide if it’s worth taking.
- Be flexible. As stressful as this is for you, the seller is also feeling some pressure too. Some sellers may want to close quickly, while others need time to find a new place to live or settle other affairs before moving out of the home. Try to accommodate both of your needs and timelines.
Being in a bidding war is stressful for all parties and sometimes, no matter how good your offer is, you may be outbid. Make sure that at the end of the day you feel comfortable with your offer, you can afford it, and you know the risks of waiving any contingencies. Be as quick as you can in your communication since things may move fast but try to avoid making emotional decisions you may regret later. The right home will come along eventually. If you still need to get pre-approved, our lending team can help you on your home buying journey.
Vice President, Senior Mortgage Lender
NMLS MLO ID: 532621