Bidding wars often occur when the housing market inventory is low, but there are many people looking to buy. For example, if there is a specific highly desired neighborhood, with only one home for sale, there is almost always going to be a bidding war. Bidding wars are tricky, and are usually impulse-driven. Great for sellers, but bad for buyers. So, how do you deal when a bidding war begins? You want the house, but you don’t want to over pay. Here are some potential things that can go wrong, resulting you to lose in a bidding war. See: Find Your New Home – Zillow.
The first issue is not realizing that there is a bidding war. You need to be armed with the current market. Hopefully you have a good realtor who lets you know ahead of time that the house you are looking at is going to be in high-demand. This way you can be proactive, and get your offer in first before all the others come, for example. If you attend a viewing, take note of how many people are present. Watch them closely, to get an idea of how interested they seem in the home. If a few buyers seem like they are truly interested in the house, you’ll know right away that you can expect some serious competition.
Now is not the time to be unorganized. When you submit an offer, it must be clear, and in order. Don’t hand over an offer with vague contingencies, a low number, and just an overall mess. It must be completely concise, in order, and a fair offer. When a home is in high demand, the seller is going to have enough offers (that are in order), that they aren’t going to have to fumble through yours like they would if there wasn’t a lot of activity on the house. Here are some questions that you should ask yourself when submitting an offer:
•does the seller have a deadline to submit an offer?
•is the seller requesting the offer be presented in a certain format?
•Are there certain contingencies that could sway the seller to choose your offer over the others? (For example, if they want to move on a certain date, be flexible and offer them that date. They’re more likely to choose your offer over the others, if the move-out date benefits them).
Don’t forget to include your pre-approval letter regarding a mortgage loan. They need to know that you can actually afford the house. If you submit an offer, it means nothing if you can’t prove that you’ll be approved for a loan. Unless you are paying all-cash which is unlikely for most home buyers. See: Find Your New Home – Trulia.
On the other hand, if you’re able to offer an all-cash deal on the house, do so. That is the biggest, most sure-fire way to win a bidding war. You also will not have to pay as much on the house, since all-cash offers are preferred over offers that have to do with mortgage loans.
The most important part of a bidding war is knowing when it’s time to cut your losses. If you find yourself raising your offer price again and again, you should seriously decide whether or not you want the house badly enough to over-pay for it. When it comes time to sell, you’ll probably lose money. Decide if it’s worth it to you. For further reading, see: Bidding War Basics for Buyers, and, Winning a Bidding War.