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How to Prepare for a Bidding War

If you are buying a home at the height of a citywide seller’s market or simply want a sought-after house or condo in a specific neighborhood , you may find yourself in the midst of a real estate bidding war.

 

In the thick of competition you may forget your end goal is a home you love and can afford to own. If your offers have been turned down by several sellers because of competing buyers, then you may feel pushed to make an aggressive offer for the next home you like.

 

To guard against making an emotion-fueled offer for a house, take a hard look at your finances. While it may feel good at first to beat out other buyers and to purchase a property, it won’t feel so great in a year or two when you are struggling to make the payments on a house beyond your means. Know your limits before you begin to bid.

 

Your first step before entering a bidding war should be to consult with a lender to understand the maximum amount you can borrow,and your comfort level with that number.Then evaluate how much cash you have to spend while keeping enough money in a reserve fund. .Most lenders require at least 2 months of mortgage payments in reserves.

 

 

Next, make sure you hire an experienced REALTOR® who can share information about local market conditions and communicate with the seller’s agent. You should rely on your REALTOR® for advice about how to handle a bidding war, but be sure to do your own research: visit a lot of homes in the area where you want to buy so you understand the value of various properties before you make an offer.

 

In a bidding war, it’s important to work with a REALTOR® who will move quickly to present your offer and any counteroffer, one who is easy to communicate with during the transaction.

 

While you may assume money is the motivator that steers sellers to one buyer over another, there are other ways to make your offer attractive, such as these ideas:

 

Solid financing: You may be competing against cash buyers, so make sure your loan pre-approval is in place and you have completed all required documentation other than identifying a specific property.

 

Eliminate contingencies—carefully: If you own a home now, making an offer without a sales contingency is huge. Most lenders unless you own your home outright will make your loan on the new property contingent on the sale of your current home. Before making an offer make sure your current property is on the market and ideally already has an offer in. The best scenario is to sell the property first, this will eliminate a sales contingency, also allows you to have the cash needed readily available.You can also decide to have an “information only” home inspection rather than making your offer contingent on the outcome of the inspection. But make sure you have the cash available for repairs. If you’re buying a condo your risk becomes less most of the major repairs that could come up are split evenly by all the other owners.

 

Flexible closing date: Rather than negotiating on a closing date convenient to all sides, you can tell the sellers you will work with their schedule.

 

.Personalize the transaction: Sometimes the tipping point for sellers who receive multiple offers is something emotional rather than financial. A personal letter describing your love of their home or similar lifestyles may tilt the scale in your favor. I had one client who noticed the seller like herself not only was an attorney advocated for homeless children but also gardened. Writing a letter expresses their similarities accompanied the offer, ended up winning the property.

 

Control yourself: Remember that any offer is subject to an appraisal (unless you waive that contingency, but that’s not recommended unless you have plenty of cash), so be careful not to bid above the market value of any property.

 

Dates should be tight: Sellers feel safe once the property has a Purchase & Sale signed. You should make the P&S date as close to the accepted offer date as possible. I advise my clients to have the home inspection, and go to P&S within 8 days of the accepted offer. Granted this is a lot of rushing, but after the P&S is signed then you can breath a bit till closing.

 

 

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