7 Bidding War Strategies
When you’re competing with a lot of buyers in a real estate Bidding War, your bid needs to stand out.
You have found a home in your price range, and it’s in a great neighborhood with good schools. The yard is even fenced in for your dog. What could go wrong?
Any number of things can work against you. You might be competing with another buyer’s all-cash offer or an offer with a more substantial downpayment. What are some strategies that will help you to give you an advantage in a multiple bid situation?
When investors bid on properties to flip, they usually come to the table with cash. Cash deals are less likely to fall through.
If you don’t have cash, then you will need a pre-approval. A pre-approval shows the Seller that your income and credit score have been verified and that the underwriter has determined that you can afford the mortgage. A low appraisal could cause the deal to fall through, putting you at a disadvantage compared to a Cash offer.
Make your Best Offer First
Many times when there is a multiple bid situation, the listing agent will go back to everyone to see if they would like to improve their offer. Even if this is the plan from the beginning, accepting the offer is the Seller’s prerogative. If there is an offer that stands out in the first round, the Seller could unilaterally decide to take that offer and shut down the negotiation. Additionally, even if this is not the case, it makes sense to come to the table with your best offer. During this highly charged emotional process, a Seller will start liking the Buyer who offers more money if the final bids are close, this original offer could be what makes you stand out.
Beef up your Earnest Money
A substantial security deposit signals how serious you are as a buyer. Try doubling the customary amount for the area. If the deal falls through for one of the contingencies under the contract, then you will get the deposit money back.
Make Contingencies Palatable
Obviously, Sellers prefer contracts with fewer contingencies. Minimize the risk to the Seller when possible.For instance, you may need a mortgage, but sometimes you can waive the appraisal contingency. Or structure the appraisal contingency in such a way that If the appraisal comes in below the sale price, you could offer to split the difference with them up to a certain amount. Of course, this is determined by how much additional cash you have on hand.
Write a Love Letter to the Sellers
In my experience, price is an essential ingredient in a multiple bid; sometimes, all or some of the offers can be remarkably identical. When evaluating these offers, sellers are looking for a “sign” as to what offer they should choose. A letter that pulls at their heartstrings can be instrumental in these cases.
Give the Gift of Time
If you can be flexible with the closing date, that can give you an advantage. Or, sometimes, you can offer the Seller a Closing Date with an option for a “Use & Occupancy.” Your attorney will work out the details of the U & O.