Have you heard bidding wars are back? For the past year or so, the demand for homes has increased yet at the same time the supply of homes is becoming more limited. This time last year there were 32,808 homes on the market for sale, and this year that number is just 24,448, a decrease of 25%. A combination of fewer homes on the market and more buyers is a recipe for multiple offers on homes, which can trigger bidding wars.
Offering the highest price might seem like the best way to win a bidding war, but home sellers consider other factors when accepting offers on their homes.
Do you have a strategy to win a bidding war for a home without overpaying?
Watch John and Anthony discuss How to Win a Bidding War on Fox25 Morning News:
We are right now in prime real estate season and if you’re in the market for a new home you’ve certainly heard of bidding wars. Inventory for homes is low which means bidding wars are back. How do you win a bidding war? Well our real estate experts John and Anthony from McGeough Lamacchia Realty are here to help. You know I compare this a lot to buying a dress on ebay. After a while it’s not quite as important getting the dress as much as winning that you want to do right?
That happens for some people.
You get emotionally involved.
A little bit. People always want something that other people want as well but with inventory levels as low as they are buyers are reacting faster than we’ve ever seen, I mean things are happening within days of a home going on the market so we’ve outlined 4 helpful tips to get those buyers to actually get that home
Well let’s talk about that because a lot of times realtors are recommending that people competitively price their homes and then all of a sudden there is that action that you start to see to make that price climb but if you’re a buyer you don’t want that.
That’s right. This is great for sellers, it gives you leverage, you call the shots more, you can pick your closing date certain things throughout the negotiation other than price you have more leverage you also can get more money which is important for buyers it can be very frustrating.
So tell us about the process how you go about winning a bidding war
First point is when you’re making an offer obviously you love the home it hits all the criteria that you want to make sure the first thing is that you have an updated pre-approval
Ok so you’re walking in with that paperwork
With the offer, and we want it updated within weeks –at the latest—30 days because if you’ve been looking for a couple of months, maybe it’s back to February you want to have it updated so that a seller says, ok these folks have recently been in front of their mortgage broker.
Very important, what’s next?
Also make sure your first offer is a good one. I bumped into someone last week, a buyer, not working with us, just a friend of a friend, who made 8 offers on homes and hasn’t gotten any of them and I said tell me about how you’re going about it, and he said well I keep looking at properties that are underpriced but I don’t want to pay over list price. And I said, hold on a second, listen to what you just said, you said you’re looking at properties that are underpriced but you don’t want to pay over listing price. The list price is basically an educated guess between a listing agent and the sellers as to what a property is worth.
So you’ve got this mental block–you’ve locked yourself into your own regulations and locked yourself out of a home.
That’s right and most people learn after a few offers that you might need to go higher than that and that person probably will now. But that’s also a major factor in it, and also if you can add some personal touch , you know, if you’re an investor and you’re paying cash there’s not much personal touch, what are you going to say, I want to buy your home, flip it, and make money? That doesn’t resonate well with sellers, but if you’re someone who needs a home, maybe you have a baby coming you’re trying to start a family, you put that in your letter, that will have a real impact on the seller.
It’s funny you mention that, it does pull on your heartstrings a little bit
No question, we’ve had countless buyers win bidding wars because they wrote a personalized letter commenting on the backyard the children, the neighborhood, whatever it might be, and we’ve actually had situations where they accepted less than other offers because there was some connection between the seller and the buyer that is an important third tip which is personalizing the offer with a nice letter.
Because the seller wants to know you know I’ve loved this home I want someone else to love it.
I think it works well especially with folks who have owned their home a long time. One thing I saw this past Monday that I have never seen in my career is the buyer sent a picture of their child. He took the email– it was a cute kid! We took it as it was sent to us and we forwarded it on to the seller along with the offer and that person landed the property.
What’s the last tip?
The last tip is keep the contingencies to a minimum, so as far as home inspections, mortgage contingencies , things like that if you’re in a competitive situation, and you know you’re going to get the financing, well, maybe you waive that condition, if you know that you’ve already brought folks through and one was a contractor and you kjnow the house is sound, maybe you don’t have to have that home inspection contingency those are ctirictual cpoints that will help you loand the home.
And at some point if you are locked in a bidding war you may have to walk away because it just goes too high.
That’s right and what you mentioned in the beginning, about the whole ebay thing we do see cases where buyers get overzealous about the property and initially they say well I’ll pay 400,000, now all of a sudden they realize they have to pay 450,000 and we run the numbers and say hey you know what you shouldn’t pay 450,000 for this home, find another property. a buyer who has a good agent that they trust should tell them hey you know what you should go up on this one or you shouldn’t.
That’s why these guys are the experts, John and Anthony, from McGeough Lamacchia Realty we appreciate it very much.
One of the first steps you should take when buying a home is to hire an experienced buyer’s agent who can show you homes as soon as they go on the market. This way you can see the home as soon as possible and move fast if you want to make an offer. Your agent will also help you prepare for the home buying process and provide you with all the data and analysis you need to compare properties and arrive at the right price that works within your budget.
Here are a few steps you can take to win the bidding war and get the house you want.
1. Have an Updated Pre-approval Letter in Hand
Have your pre-approval in hand even before you start looking, and have it updated every 30 days so you don’t miss out on getting the home you want. Make sure the amount you’re pre-approved for is the amount you’re offering on the home. If you want to make an offer on a home that is priced above what you’re pre-approved for, get it updated to match that amount. Getting pre-approved will make the mortgage application process smoother since you will have already spoken to a mortgage broker and gathered the documentation necessary for the loan. And if there are multiple offers on the home, having a recent, up-to-date pre-approval letter is a distinct advantage over a buyer who doesn’t.
2. Make it Personal
Writing a letter to the seller about why you are the best person to own the house can help to humanize the transaction. Sellers want someone to love the house as much as they did. Tell the seller why you love the home, why you would be the best owner for the home, and tell them a little about yourself so the seller can picture you as the owner. A home seller can easily connect with a buyer who expresses how much they love the neighborhood or will maintain the garden they planted. A personal letter can give you an added advantage when it comes time for the seller to accept an offer.
3. Keep Contingencies/Demands at a Minimum
A seller will often prefer a buyer who doesn’t put any contingencies in their offer, such as having to sell an existing home before they can purchase a new one, or having a home inspection done. Although we generally do recommend that buyers have a home inspection, in a competitive situation it can help not to. Keep your demands at a minimum as well. Too many back and forth negotiations about repairs or appliances may make the seller turn to another buyer. Only request what is necessary. If you must have contingences such as a home inspection, make sure the timelines for them are short.
4. Make Your First Offer Count
Speak with your buyer’s agent about what your first bid should be, and make sure it’s your best. You will often only get one chance to bid on a home, and an experienced agent will know the market and what the best offer will be for your budget. Don’t waste your time—or the seller’s time—with a lowball offer.
Above all be patient! Don’t get caught up in emotions when presenting your offer or take it personally if your offer is rejected. There are many factors in play during multiple offer situations, and you won’t always know all the reasons why a seller chose another buyer. Just stick with your original budget and strategy and the right home will be yours before you know it.