In a competitive housing market, bidding wars on for-sale properties can be common. There are a few steps you can take in this scenario to put the odds in your favor and get your offer accepted.
What to Know Before You Enter a Bidding War
Bidding wars typically occur in a seller's market, when there are more people looking to buy homes than there are homes for sale. When multiple buyers have made legitimate offers for the same home, the seller can choose which one they want to accept.
As a buyer in a seller's market, it's important to have the information, resources and the right team of professionals to ensure you find the right home for you.
- Do you know how much you can afford?
- Do you know your needs, wants and dealbreakers?
- Is now the right time to buy a home?
A homebuying checklist can help you answer these questions and prepare for the homebuying process.
3 Strategies to Win a Bidding War
Once you find the right home for you and you’re ready to seal the deal, these next few steps could give you an advantage over other potential buyers in a bidding war.
By having a pre-approval letter from your lender, you're telling the seller that you're a serious buyer, and you've been pre-approved for a mortgage by your lender for a specific amount. These are essential because, in a true bidding war, your offer will likely get dropped if you don't already have a pre-approval letter.
Break out your pen and paper and write a personal "Dear Seller, Pick Me" letter. Emotions play a big role when making an offer, and your letter puts a live person, and a serious buyer, behind the transaction.
In real estate, cash is undoubtedly king, and an all-cash offer can significantly increase your chance of getting the home. This is because all-cash offers are more streamlined with fewer possibilities of falling through. However, putting in an all-cash offer is unrealistic for most families, so going with strategies #1 and #2 are likely your best options. Never put yourself in financial risk when making your offer.
Should You Remove Contingencies to Win a Bidding War?
Contingencies are in place to protect you as the buyer so that, if an issue arises during the transaction, you can back out and get your good faith deposit back. There are several common contingencies in real estate, including appraisal contingency, inspection contingency, and home sale contingency.
Removing contingencies may give you an edge over other potential buyers, but it may not be in your best interest in the long run.
If you decide to drop your contingencies, consider the risks involved with each one, and don't take the decision lightly.
Every local market and seller's situation is different, so make sure to rely on your real estate agent's professional advice throughout the process.
For more information about the homebuying process, visit My Home by Freddie Mac®.