The real estate market today is increasingly competitive. And with a competitive market comes bidding wars. With so many bidding wars taking place, we want to take a moment to discuss our tips on how to win a bidding war.
Tips on How To Win A Bidding War
Having your financing lined up is one of the best ways to make your offer attractive to sellers. In order to do this, get a pre-approval from a reputable lender. In our experience, we’ve found that using a local lender that the seller’s agent may have worked with in the past can help you win a bidding war. Why? Because the seller’s agent is more likely to trust someone they know and they know the lender’s reputation.
If you obtain your pre-approval online, that’s still a great step. But the seller’s agent doesn’t know who did the pre-approval or what guidelines were used.
Here at Mortgage Specialists, of all the pre-approvals we have ever given, 99.9% have closed. We have such a high closing rate because we only give someone a pre-approval after verifying all of their documents are accurate.
We also have a great track record for closing on time. We’ve spent over 20 years honing our process and know how to effectively communicate with each person involved on the loan to ensure a timely closing.
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Ask about the seller
Another great way to win a bidding war is to ask your real estate agent to inquire what is most important to the seller. In some cases, the price isn’t the most important. Some sellers would prefer to get less money if it means they have found the perfect family to care for their former home. Other sellers might prefer an offer that pushes the closing date back a few weeks to coordinate better with the purchase of their new home. You’ll never know what to offer the seller if you don’t ask, and it doesn’t hurt to ask.
Write a love letter about the home
Is there something about the home that you really love? It could be something as simple as loving the updates the seller has done on the home and telling them that you wouldn’t change a thing. Or it could be something like telling them how much you love the layout of the first floor because it will allow a family member in a wheelchair to easily navigate the home. Regardless of what it is, include a letter detailing exactly what draws you to the home when you submit your offer. Sometimes a personal touch can go a long way in tipping the scales in your favor.
And your love letter doesn’t necessarily need to be about the home itself – it could be about the neighborhood, nearby district, or even an extracurricular activity your kids participate in.
Get a conventional loan
Sellers don’t like FHA loans because they’re government-insured loans, meaning they have stricter guidelines. For example, if the home is appraised for less than the agreed-upon price, the seller is required to reduce the selling price to match the appraised price.
Another major reason sellers don’t like FHA loans is because the guidelines require appraisers to look for certain defects that could pose habitability concerns or health, safety, or security risks. If any defects are found, the seller must repair them prior to the sale.
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Save additional money
In case a bidding war breaks out on a home you have your heart set on, we recommend having a little extra money saved up so you can compete with other offers. While the strategies above are helpful, sometimes it all comes down to the amount of money you’re able to offer a seller. In those instances, it’s nice to know you’re prepared to increase your offer.
Plus, in a competitive market, it’s common to see homes selling for more than they appraise for. Lenders aren’t able to provide a loan that’s larger than the appraised value, so it’s always good to be prepared to make up the difference between the appraised value and the sales price.
Offer to pay the seller’s fees
Another great way to make your offer stand out is to offer the seller a little something extra. In this case, we recommend offering to pay the fees the seller would normally be stuck paying, like the real estate agent and title fees. Doing so may be attractive to sellers, especially those looking to buy another house, because it’s less money they have to pay out of pocket that they’ll then have to help cover the costs of purchasing their next home.
Ready to start the mortgage process? Our online application takes anywhere from 5-20 minutes to complete. Once it’s submitted, we can have you pre-approved for a loan in just a few hours.