6 Steps to Winning in a Bidding War
Are you getting frustrated about buying a property in this rising market?
Do you feel like giving up?
You've made an offer for your dream home but lost again to the higher bidder.
Did you know that the highest bid isn't always the winning offer?
Read on to discover the six most important tricks to getting your offer noticed and finally accepted.
But before I begin, I should say this. Your realtor should be keeping you posted on how many offers are likely to come through for the property you're bidding for, so you'll know the kind of competition you're up against. The latest sale comps in the area may not necessarily reflect the actual sold price of the property you intend to buy, when there's likely going to be a highly motivated buyer outbidding the last comparable by $20,000, $50,000 or even $100,000. The market is changing drastically from day to day, making it so unpredictable. This is why you must be super prepared, more than ever.
My advice to you is put your best foot forward, always, in a bidding war situation.
Here are the six steps to ensure you'll always win in a bidding war:
1. Have a Pre-Approval Letter attached to your offer
Request from your bank specialist or mortgage broker the copy of the pre-approval letter. This is evidence that you are capable of getting financing and will make your offer look strong.
2. 10% Deposit or higher
A higher deposit is far more attractive. It shows you are serious when you have more at stake. The deposit goes towards the down payment of your purchase price and is typically submitted once subjects are removed from the contract. Normally, the deposit is held by buyer agent's brokerage as the stakeholder, but if you submit the deposit directly to the seller this will show your seriousness.
3. Completion and Possession Dates
The seller may be set on certain dates on the contract, and if you are able to match these dates your offer will definitely look much stronger than the ones that can't match their dates. The seller can reject the offer entirely because of the conflicting dates, even with the right price. Your realtor would need to find out about these dates and put that in the offer.
4. Short Subject Removal Period and Minimize the Number of Subjects
This is huge! Sellers will not want to accept an offer where there is just too many subjects and have the offer tied up for too long. I tell my clients to shorten the subject removal time to 3 days max, if possible. More than that, the chances of winning in a bidding war gets low.
5. PRICE, PRICE, PRICE
While all the other tricks will help, some sellers will primarily look at price. Price will always play a big factor, but not the biggest factor if you're competing against a subject free offer with an acceptable price.
6. Subject Free Offer
Zero subjects on the offer. Wipe out the subject to financing clause, the inspection clause, the appraisal clause, etc. And, include the deposit with the offer. But, only if you can! You'll need the advice from your realtor and mortgage broker.
This shows you're 100% committed to purchasing the property. The seller and agent will look at this kind of offer more favorably AND would likely choose this offer over an offer with a higher price but comes with far too many subjects that makes it just too risky.
If you follow these steps, you'll be the winner at the end and soon be moving into your dream home and be done with competing in bidding wars. Let me know how it goes!
Good luck and all the best!