Buying a Home in a Bidding War: Tips and Tricks
When a particular market within an area is relatively hot when compared to others, aspiring home buyers can find themselves competing against other home seekers for the same small pool of properties. In these particularly competitive real estate markets, sellers often set prices a little low to encourage a bidding war. With these tips, buyers can work to win the war without completely losing their heads.
Research Market Value
Although bidding wars can be quite common in certain parts of the country, fair market value tends to keep prices in check. The mortgage appraisal acts to protect the buyer's interest as much as the lender's. Since the value of the home is only partially based on demand, there really is little point in bidding much beyond a home's value, except for buyers who have plenty of cash to make up the shortfall. Buyers should ask their agents to do a market analysis on the homes they want to buy, to make sure that the values requested in the bidding war are likely to pan out.
Be Ready to Commit
In a market where bidding wars are the typical thing, people can feel pressed to jump in on virtually every house they see. However, this could be an unwise strategy, especially for homes that do not meet the buyers' needs. People should keep in mind that even if 10 buyers bid on the same house, one of those bids will probably be chosen. High demand for homes in an area does not mean that buyers cannot be selective. It is better to avoid making an offer on a home that falls short. Interested buyers should be prepared to commit to buying any home they bid on, if their purchase offer is selected by the seller.
Offer Other Benefits to Sellers
Since offering more money can be so unpredictable once the appraisal report arrives, buyers also have to use other methods to make themselves attractive to sellers. The best thing buyers can do is try to find out the sellers' motivations, and match them. A seller who needs all the cash from the sale will be less likely to accept an offer demanding help with closing costs. Sellers who need time to buy a new home before they move will be happier to take offers from buyers who afford them that flexibility.
Set a Limit
Everyone has a personal limit on how much they are willing or able to pay for an Ignacio home, and it varies from buyer to buyer. People should answer the following questions before they make an offer on a hot property:
- How much can I afford?
- What do I think this home is worth?
- Can I pay extra in cash if the offer price exceeds the appraised value?
Buyers can ask their agents to help them negotiate in the bidding war to raise their offer up to a set maximum. If the buyer's agent knows this number in advance, they may be able to keep working with the seller's agent without as much input needed from the buyer.
Try a Personal Touch
Sellers are people who mostly want to get a good price for their homes, but they have other needs as well. A homeowner who put decades of loving care into a home may be more content to accept an offer from a buyer who is excited to live in the house, too. Sometimes, all people have to do to set themselves apart is write a letter to tell the sellers a little bit about their goals, and what they love about the house.
Buying a home when the market is hot calls for a cool head and the right tactics. When buyers target their search and focus on their appeal to sellers, they have a better chance of securing a fair purchase contract.