In this market, the list price is just a teaser to get buyers into a bidding war. Many homes are selling significantly above the list price. So, it is smart to look at homes that are NOT at the top of your budget. This gives you room to make a competitive offer.
Act quickly! Homes are going fast and the competition is high.
Upfront Underwriting: talk to your lender about going through the underwriting process now. This makes you a stronger buyer because you already have your loan approval completed. This can also decrease some of the transaction timelines/deadlines allowing for a quicker closing.
Have your agent do some homework:
Your agent can reach out to the listing agent to see what kind of information they can get regarding what the sellers are looking for or if there are other offers. The listing agent does not have to give us this information, but it doesn’t hurt to ask.
Your agent can also research how high properties are selling above list prices in the area.
Earnest Money: put more than the typical 1% down for your earnest money. This can catch some attention and spark conversation (and interest) with your agent. This also sends the message that you are a strong buyer with cash reserves, which is reassuring to sellers.
Inspection Contingency:
Waive the Inspection: this is definitely not for everyone, however if you are planning to renovate the property you may feel comfortable doing this. Or if you are handy, have plenty of cash reserves and feel comfortable making any needed repairs, then this might be a good option.
You can offer to take the property “as is.” This means you can still have an inspection, however you are not going to ask for repairs or money for items that come up in the inspection. Or you could say that you will only ask for repairs/money if large items come up in the inspection that cost at least a certain amount (i.e. $2000).
Waive the Appraisal: you are saying that if the property appraises under the contract price, you will pay the difference in cash. Or you can offer to pay up to a certain amount of the difference (i.e “not to exceed $5000”).
Do Not Ask For Closing Costs: in a normal market it is common to ask for closing costs… however in this market it could cost you a bidding war. Asking for closing costs can send the message that you do not have cash reserves which can cause sellers to wonder how strong of a buyer you are. If there are multiple offers, sellers will most likely go with a buyer who is not asking for this.
Highest and Best: in this market most homes are going to have multiple offers and there will be no options for negotiating. In fact, we are seeing more and more listings notate submission deadlines at which time the sellers will review all offers and make a decision. So be aggressive and make the best offer you can make from the start.
Escalation Clause: this is offering to pay a certain amount above the highest net offer, up to a maximum amount you are willing to pay. For instance, lets say you offer $350,000. You could write an escalation clause saying you will pay $1000 above the highest net offer, up to $360,000.
Disclaimer: These are ideas that might help you win a bidding war in the current market. Keep in mind that these tips are not going to work for everyone and that we are NOT saying that you need to do any or all of these. These are just strategies to keep in mind when thinking about making an offer on a house in this current market.
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