Turning Bidding Wars to Your Advantage
Bidding on a home in a hot real estate market can seem like a scene from an old gladiator movie, with fierce warriors fighting each other in sword battles with only one remaining standing. Thankfully, you don’t have to risk your skin bidding for a house, but the contest can seem fierce. To turn the tide of the bidding wars in your favor, consider these important steps.
First, do all you can to show a seller that you can make good on your bid. That means having your finances in order. Don’t be heavily in debt. In fact, it’s advisable to not have any debt at all if possible. Get an approval for a loan before you offer your bid. Sellers will look at bidders with loans that are not yet approved as too risky. Be ready with a cash payment as well.
Next, be prepared to have other bidders increase their offers over yours. You can try and stay ahead of other bidders by putting in an escalation clause. This informs the seller that you’re willing to boost your bid beyond your initial offer to a new set amount. However, you should specify that you will only escalate your bid slightly above the next highest competing bid. This will keep you from overpaying for a property.
Sometimes bidding wars are won by extending courtesies to a seller. As part of your bid, you can allow more time for the seller to move out of their house. You could even offer to let the seller rent the house back for a short period of time. This helps out a seller who would have to spend more money on moving out or is pressed to find a new place to live. Conversely, if a seller wants to move on from the property more quickly, you could offer to move up the closing date. Even if you are outbid, a seller may end up choosing your bid because of these courtesies.
Finally, a losing bid doesn’t mean you’re knocked totally out of the bidding wars. The winning bidder may have offered a price way above the actual asking price. Those bids have a high rate of cancellation, which could make your bid look more appealing, especially if it’s closer to the asking price.
Winning a bidding war may seem like scaling an impossibly high mountain, but the good news is that there are ways to come out on top, even if you actually lose a bid. Assuring a seller you can follow through on your bid, plus add some convenient allowances for your seller, can help you prevail in a fierce contest.