I’ve been hearing from many frustrated buyers lately that they simply cannot find a home. Why? Either they are putting in offers and getting outbid by others, or they are simply a day too late, or a dollar too short. So how do you win in a market full of bidding wars anyway? Here are my tips:
1. Have a mortgage lender on speed dial! Too many buyers start looking at homes about the same time they speak to a lender. You need to speak to the lender FIRST, get them your financial documents and get a pre-approval ready to go so that all the lender has to do is plug in the address of the home and email it to you. It’s not a bad idea to have a file folder constantly updated with your most recent pay stubs, all pages —even blank pages — of recent bank statements and any other documentation the lender may need to make a quick loan approval. Then you will be ready to make an offer. If you need a recommendation of a good lender – contact me.
2. Cash in your pocket plus the proof of funds. An all-cash buyer has an advantage in many ways. They can waive the right to an appraisal if they are comfortable with the value of a property. Whether you are a cash buyer or are applying for a mortgage, it’s a good idea to have a proof of funds showing the cash in your bank account. Even if you are only putting 10% down – show that you have 10% in your bank account. A screenshot showing your name, the bank name and balance should suffice. You can black out any account numbers. However, I recommend at a minimum, you should offer a down payment of 20% if you know you’ll be competing against other buyers. You need to show you have the funds to close and the ability to make up the difference if the appraisal comes in too low.
3. Make a fast, personalized offer. If you want a jump on other buyers out there in the market, make sure your Realtor has your MLS search set up for “ASAP” – meaning the minute a property hits the market, you both get an email, and thus can go see it right away and write the offer. Then your agent should be tenacious enough to talk to the listing agent and find out as much as they can – what’s motivating the Sellers to sell, what do they want or need? Quick closing, more in escrow? If you can be flexible and cater your offer to the Seller’s needs, you just might have your offer chosen over another buyers. I also like to include a handwritten note from the buyer to the seller telling them why they love the home so much. After all, selling is a very personal and emotional process – and a nice note can go along way to making a seller feel warm and fuzzy about the new buyer.
4. Keep your home inspector on alert. Most Realtors don’t recommend buying a home without an inspection (including yours truly), but making your offer contingent on an inspection can weaken your position if other buyers are waiving an inspection contingency or have a shorter inspection period. Buyers should carefully read all disclosures and reports that are available, and I recommend that if you know you are going into a multiple offer situation – its not a bad idea to shorten your inspection to a 5 day or 7 day inspection period instead of the normal 15 allowed for in the Florida Real Estate Contract.
5. Eliminate or reduce contingencies. One of the best ways to make your offer stronger is to eliminate or reduce contingencies in the contract regarding home inspections, financing or appraisal. This puts you in a more solid position to win a bidding war. If you have cash reserves to cover the gap between a low appraisal and your offer, you can waive the appraisal contingency, but leave your financing contingency in place to protect yourself. Make the offer as strong as possible, so if you don’t need a home warranty or help with closing costs, don’t ask for them.
6. Try an escalation clause — maybe. An escalation clause is an addendum to a purchase offer that authorizes your Realtor to offer a specified amount above the best offer the seller receives. It’s a powerful way to wage a bidding war, and the Seller must provide proof of the highest offer received. I recommend that buyers who want to offer an escalation clause be very careful when choosing to go as high as they can with the understanding that they can live with the price if it goes to the maximum amount. Not to mention – the Seller could always just counter the offer at that highest amount you said you could live with. In my eyes – you are better off offering the highest amount you can live with if you are truly in love with the home, while not feel like you overpaid rather than using an escalation clause.
7. Go in with an odd number, maybe over asking price. If I know my buyer is going into a multiple offer situation, and the home is priced well to begin with, I like to suggest offering slightly over the asking price…but don’t use round numbers. Let’s say the listed price is $349,000. I might suggest an offer of $352,557. It’s approximately $2,500 over asking – which will make a negligible difference in one’s mortgage payment – and the odd number might beat out a buyer who offers $350,000, or $351,000, or even $352,500.