When you hear the term “bidding wars,” images of a frenzied auction might come to mind. You are desperately waving wads of cash in the air and shoving crowds of other anxious buyers out of the way as a man with a mustache and a suit spews ridiculous prices at breakneck speed: $3 billion for the house with a view on Picture Perfect Street, $3 billion $3 billion $3 billion any takers, going going GONE!
Luckily, while bidding wars can be stressful at times, they are nothing like this scene, and they certainly aren’t actual wars. Bidding wars simply refer to the process that happens when multiple offers are made on a home, usually driving the original asking price higher.
This situation is common in housing sales. Bidding wars are especially common in a seller’s market, which is the current state of the 2017 real estate market. Additionally, while mortgage rates have increased slightly in 2016 and 2017, they still remain relatively low, and these low mortgage rates are also driving the competition.
To help you navigate this situation, here are a few ways you can prepare to beat the competition.
1. Hire a Real Estate Broker
The best part about hiring a professional is that it removes the pressure on you to know everything. With a Real Estate Broker on your side, you don’t need to know everything about current state of the market, or every single strategy to win a bidding war. Instead, a professional Broker will have a thorough knowledge of your local market and neighborhoods and will help you navigate the tricky process of a bidding war.
2. Get Pre-Approved For a Mortgage
Professionals in the real estate market agree that having your financial documents in order are critical in a bidding war. Slightly different from a prequalification, a pre-approval from a mortgage lender will assure a seller that you are able to obtain financing for a home. Include with your offer your letter of Pre-Approval plus a letter from your Loan Officer stating that your lender has underwritten your application and that it’s awaiting appraisal. This reassurance and personal touch will make your bid stand out against the competition.
3. Cash Is Ideal
Most of us don’t necessarily have heaps of cash on hand (i.e., the scene described at the opening of this article). However, if you do have cash available, use it, if only for a stronger downpayment. The certainty of cash can significantly improve your chances with a seller.
4. Start Strong
Now’s not the time to be coy. If your heart is set on a particular home, and if the home is worth it, offer the seller the most you can afford. (Take the time with your Real Estate Broker and Loan Officer to carefully figure out this number before making an offer.)
That said, be careful not to get overly emotional in the heat of competition and overpay for home. Again, a Real Estate Broker will help you know what’s too much and when it’s time to quit.
Additionally, according to the New York Times Real Estate section, keep in mind that “if you’re offering more than the asking price, be aware that your mortgage lender may appraise the home at a lower value — which could leave you on the hook for the difference.”
Don’t get too discouraged if you lose a bidding war or two. This is a normal part of the process and other potential homes will pop up.
To make a WINNING offer on a home, call the SeaReal Team today: 206-518-5518 or firstname.lastname@example.org