Last March, my husband and I were sweating bullets until we FINALLY got word that we won the bidding war for our home in Michigan. Awaiting this confirmation was pure torture considering we knew of at least three other bids offered for the four-bedroom home.
When the good news came in from our realtor, I wanted to start singing Queen’s “We Are the Champions”! This experience taught me that you shouldn’t give up on your perfect home just because there are other bidders. You CAN come out victorious when you arm yourself with the right knowledge and tools. Here are some helpful tips to keep in mind in case you find yourself knee-deep in a bidding war.
Get a Real Estate Agent
First, be aware that bidding wars are often the result of a limited inventory of properties, which causes prices to rise. This often happens in revived urban real estate markets, such as Washington, D.C., or Detroit. But no matter which state you live in, always find a real estate agent with experience in your area. A real estate agent with local experience may be able to provide valuable advice to help you stay two steps ahead of your competition.
One very critical thing to do even before the bidding starts is to get preapproved for a mortgage. Most real estate agents say that having your confirmation in writing gives you prime buying power. Your preapproval will help you know your offer ceiling.
Keep a Clear Mind
Be sure to keep your feet on the ground when you’re walking through prospective homes. Just because a home shows well or has a couple of cool features doesn’t necessarily mean it’s worth bidding on! Ask yourself, “Is this the right house for my family?” or “Does it fit my tastes?” If possible, visit the property a few times, because each visit may give you a new impression (good or bad). Multiple visits may give you new insights even before getting to the bidding table. Shift into eagle-eye mode so that you can spot the things that are worth bringing up to the broker. (Who knows, you may even get to chat with the homeowners if they observe you admiring their house!)
If you feel that you’ve found the ONE, don’t get too caught up in the excitement of bidding. Remember, you’re not in the front row of an art auction armed with a bidding paddle! Overcommitting or overpaying for a property is very dangerous.
Do Your Research
Do your homework to find out the fair market value of the home that you want. Websites such as Trulia.com or Zillow.com are great ways to do more research. By knowing the current market value a house should fetch, you can guess what other bidders will offer, and then you can bid above.
Make a Large Down Payment
Putting down a cash down payment or a hefty down payment also can help to give you an advantage over other bidders. Nothing speaks louder than cold, hard cash! So if you have the available cash to put down, then go for it. But don’t try to break the bank – your bid must be comfortable for you to manage.
It’s also important to think fast too! If you want to position yourself as a bidder, then you can’t go undecided on a home too long. It may be a good idea to be proactive about finding a home inspector. Sometimes an inspection can take a few weeks to schedule, so if you’ve already selected a professional company, then tee them up for your prospective house. The seller usually wants a quick and hassle-free selling process, so it’s important to be as prepared as possible.
Don’t Add Too Many Conditions
Also try not to add a lot of additional requests or terms to your bid. If it comes down to deciding between a clean offer (free of stipulations) and a complicated offer (with a laundry list of conditions), the clean offer will win every time.
Overbid (Within Reason)
Reasonably overbidding is another power play to help you win a bidding war. My husband and I bid over the asking price by about $5,000 to ensure that our bid was strong and noticed by the seller. Submitting a strong bid is the best way to convey that you’re a serious buyer. Uneven bids are acceptable too, and they may help you beat out another bidder. Even if your bid is slightly higher than another, it may still help tip the scale in your favor.
Think Like the Seller
Try to figure out what the seller’s trigger is – that is, what would make them sell. For example, if they want to relocate or sell their home by a certain date, try to incentivize your offer by being flexible. You also may want to offer to pay certain fees to help you win a bidding war!
Lastly, don’t be afraid to counterbid multiple times! Again, this shows that you’re serious about winning. And your game face may help give you just the edge they need.
To learn more about bidding on a home, click here.