10 Tips For Winning A Bidding War
Okay, so you’ve just found the home of your dreams, the bargain of a lifetime, or that perfect investment opportunity; and now someone is trying to snatch it from your grasp. Perhaps there are multiple offers. What do you do?
The first thing to do is analyze your situation. Is this truly a “must have” home—Is it located near the in-laws who will be available for baby-sitting—is it the only home available in the perfect school district—is it near your church, favorite mall, or work? Perhaps it’s all of the above, but is it truly unparalleled? Don’t allow your emotions to overrule common sense.
If, however, you’ve considered the alternatives and have determined that it is both practical and prudent to raise the stakes in your purchase offer, there are a few things you can do to help insure that your bid wins out.
Generally not presented in the first purchase offer, escalation clauses can significantly increase your risk. But if you simply must have the house, and can afford to pay more, then this clause is one way to increase your chances of acceptance, especially in situations of multiple offers. Such a practice, however, also increases the potential that you will pay more than a property is worth; and you may have to increase your down payment if the home fails to appraise for the purchase price.
Finally, trust your agent and allow them to guide you through the process. If you have chosen an experienced and qualified agent, one that is experienced in the negotiations process, you’ll have a distinct advantage.
- Price. Is the home actually worth more than your original offer? If so, then consider increasing the offer. This is where the advice of a knowledgeable Realtor® can be a tremendous asset. Get their advice on pricing as well as their opinion on competing offers. Your Realtor® may be able to discover facts about the other bids that will assist you in making your decision.
- Stipulations. It’s not always about price. Make your offer as clean as possible, another area where your agent can provide helpful advice. The fewer stipulations, the easier it is for the seller to understand and be willing to accept your offer. Ask only for those things that are critical to your purchase.
- Closing date. Have your agent determine the seller’s desires regarding the closing date, and then try to accommodate their wishes.
- Inspection & Repair. While most buyers are uncomfortable, and rightfully so, with excluding an inspection, it is possible to exclude the inspection clause and still be protected. Just have your agent write in a specific time frame 3-7 days for your acceptance, during which time you can have the home inspected and determine whether or not to proceed with closing. You can also include an “as is” clause, insuring the seller that no requests for repairs will be made.
- Closing Costs. Consider asking the seller to pay only a portion or none of the closing costs. While your purchase costs will increase, so will the likelihood that the seller will choose your offer.
- Cash may be King, but solid pre-approval is Queen. Get pre-approved by a prominent local lender, and attach a copy to your offer.
- Ernest Money. Make the earnest money check for a reasonable amount for the price range. Your agent can guide you in this. Don’t worry about losing the earnest money, a good agent will make certain the contract protects your interests.
- Be Flexible. If you are aware of any stipulations that are of significant importance to the seller, try to accommodate them as much as possible. Remember, it’s the house you’re after, not the Japanese maple in the front yard or the workbench in the garage. If there are ways to accommodate the seller without giving too much, do so.
- Be Likeable. Don’t turn off the seller by being demanding or critical of their home. Some sellers may eliminate your offer even if it is for more money. Always be cordial and as agreeable as the situation will allow.
- Escalation Clause. A last, and for me, drastic resort when involved in a bidding war is to use an escalation clause, a clause that will increase your offer over any others, in specified increments and up to a specified amount. If you’re financially able to use this tactic, you may choose to do so, but make certain your offer includes a limited time frame when including such a clause.