You’ve found the perfect property, it’s right in middle of the best possible location, it has all your must-have features; and, it’s also within your budget. The financing is in place and the purchase offer has been delivered to the seller vis-a-via your buyer’s agent. Now, all you are waiting to hear is that the offer has been accepted and then it will be time to schedule a home inspection, pest inspection, hire a moving service, and hope the appraisal comes in at the right amount.
There’s so much at stake, not to mention the fact you’re selling your house or have given your landlord notice that you’ll soon be vacating your rental, and now, you can’t stop pacing. It’s hard to concentrate on anything else but the future and your buyer’s agent has assured you that your offer is a very strong one and should be accepted.
Then, the news finally comes, the seller has received multiple offers and you are an unwilling participant to a bidding war. Well, you have the option to simply walk away, but that’s not what you want to do; so, it’s time to entertain alternatives. If you’re here, that’s precisely what you are exploring.
The Dynamics of a Bidding War and the Seller
The seller, just like you and your fellow competing buyers, is going through a stressful and unfamiliar set of circumstances. Sure, the seller has a practical guarantee of the transaction going through, it’s only a matter of choosing which buyer gets the property. Of course, now a whole new set of factors come into play, which is part and parcel of being human.
“To compete in a bidding war, buyers need to prepare financially for the home purchase. They have to be familiar with property values in their target neighborhoods. And they must know what they want. While offering the most money might seem like the best way to win a bidding war, sellers don't always choose the highest offer. Instead, sellers often prefer offers that are most likely to go through and that meet their conditions. Here are six tips to increase your chances of making the winning offer in a bidding war for the house of your dreams.” --MSN Real Estate
Sellers will choose, not only based on offer price, but also who it is that will be calling their current house home. They’ll likely be more apt to decide to sell their property to people which they can relate because, even though they will no longer own it, want to ensure it’s in good hands. Logic does not follow here, but that’s the psychology in the vast majority of cases.
With this bit of information and some strategic, level-headed decision making, you can win a buyers’ bidding war and not feel the sting of buyer’s regret in the future. It’s all about proactively and objectively assessing the situation to know how best to proceed.
Strategies for Winning a Home Buying Bidding War
The very fact you’ve fallen in love with the house is going to be a large problem to overcome. We live in a society where waiting is a foreign, unwelcome concept at almost every turn. This being a super-sized purchase, though, should be enough to positively interrupt that mentality. Here are some things you can do to outwit your competition:
Ask your buyer’s agent for a look into the future. If the home is in an area where there’s room for future development of new homes, you should be aware of that. If it’s near a highway, that too, ought to be a matter of concern because it could be an unpleasant disruption and drive down the value of the home. Anything that will negatively impact future market value is a great bit of leverage.
Eliminate some of your contingencies. Real estate purchase contracts are decidedly in favor of consumers, not sellers. There are many contingencies built-into these legally binding documents and eliminating a few select ones might be enough to tip things in your favor.
Work on the seller’s schedule. Instead of demanding a short closing date, let the seller dictate the settlement date. This too will sweeten your offer and you can even offer a seller rent-back option which would allow them to stay for a predetermined time after closing.
Offer to pay all the associated closing costs. This is another sweetening tactic and one that can work because it helps to maximize the seller’s return on investment. Be careful about doing this because your lender will want to ensure you can afford it.
Try an escalation clause. This too, is tricky, because it necessarily ups the amount of the final sales price but, it puts you over the competition. The warning here is don’t let it go too high or you’ll find yourself on the wrong side of a specific performance action.