When the real estate market gets hot, things get crazy. Many sales get multiple offers and bidding wars erupt. Often the houses sell well above the asking price. This can be an issue if you’re a buyer. However, it’s not all about money, here are some tips on how to win.
Know what your limit is
This is especially important for first-time homebuyers. They haven’t gone through the buying process before and this inexperience can lead to mistakes.
There’s a lot of emotion involved in the buying process. After all, you’re buying your home. To prevent yourself from losing your shirt, you should be aware of how much you can afford. Use a mortgage calculator to find out how much home you can afford. Many people want to buy their dream house but they need to be realistic.
Getting pre-approved from a bank doesn’t cost any money. Take the time to interest rate shop. Even a quarter of a point adds up to a small fortune over the years. The seller wants to know that you have solid financing in place.
More generous offer
For most sellers, cash is the number one factor when choosing a buyer. They’re selling a financial asset. Sometimes it’s only a few thousand dollars.
Remember though that your mortgage cannot exceed the appraised value of the house. You’ll need to kick in extra cash for the difference.
Sometimes financing falls apart and sellers know that. Sellers prefer cash offers because it’s not contingent on a bank’s financing department. It’s also significantly faster. Wiring money only takes a day or two, while acquiring financing can take a month.
The vast majority of buyers need a mortgage to buy a home. But if you can do an all-cash purchase, consider the option. Many sellers will accept a significantly lower amount of all cash.
Contingencies are pesky for the seller. They slow down the sale and allow the buyer to cancel the deal. However, they protect you. You can make yourself a more attractive bidder if you abandon some. Sometimes this is worth the risk. For example, if you have a waiver that the deal needs to be done by a certain date, you can remove it.
Some contingencies should never be waived. Your inspection is one. There could be plenty of things wrong in the house. For example, what happens if there is lead? This would especially be a concern if you have young children.
Sellers are all different. Some want to get the deal done ASAP while others are busy or waiting on other things. By being easy to work with, you make yourself a better buyer. For example, maybe there are delays in the construction of the seller’s new home. You could accommodate him or her by allowing a modification in the closing date.
Bidding wars can be hectic and stressful. To increase your chances of winning them, use these tips.