As summer ended, the housing market cooled off compared to previous months of fast home sales. But entering the fall season, the seller’s market has once again heated up. According to Redfin, over 60% of the deals their agents wrote through the month of October had at least one competing offer. For anyone hoping to buy a home, experts say to expect a bidding war.
It’s a difficult position to be in if you want to buy a house, but the prices don’t look like they’re going to be sliding back anytime soon, if ever. In Salt Lake City, UT, nearly 80% of properties had multiple offers written. Sacramento and Indianapolis both had similar rates, 77.1% and 74.1% respectively. In San Diego, 72.1% of properties have more than one offer.
Redfin agent Jodie Lee said, “There’s still a housing shortage, which means some homes continue to receive as many as 22 offers and go for $100,000-$150,000 over list price.” Though the over-list offers are for high-priced Californian homes, most markets are seeing above-list sales frequently.
If the market is this hot, how do you win a bidding war on a house? Most buyers don’t want to pay in cash, even if they could, since mortgage rates are still well below averages from previous years. Aside from making a cash offer, here are four tips for winning a bidding war.
Research recent comparables
Real estate agents will often present comparable properties to get an idea of what a property will sell for. However, any comparables more than a week or two old will be underpriced in this type of housing market. Expect that you’ll need to be higher than just a comparable price to win.
Psychologically, a bidding war is tough on the buyer. It’s common to question if your bid is high enough to be a potential buyer or if you’ve overbid and could’ve bought the home for less. research And since it’s a seller’s market, it’s very difficult to know exactly where you need to be so the seller accepts an offer.
Comparables are a good idea to get you in a mindset of approximately what you need to be willing to pay, but also a rough benchmark of what the home’s value is. Keep in mind that a mortgage lender will need to determine a loan-to-value ratio based on actual value, not the purchase price.
To win a bidding war, there’s no room for playing it conservatively. The listing agent will be more than willing to indicate how many bids they have and are expecting to get. Trying to barely edge out the highest bid could put you in a predicament if another buyer has a “magic bullet” in their pocket like a cash offer that can close faster.
If the seller is open to an offer including an escalation clause, make use of it. Give your target purchase price on the original offer but be willing to increase it to outbid the highest offer by $2,000.
Sometimes, the most attractive offer to a seller is the one that poses the least potential for hiccups. Contingencies like a home inspection, an appraisal, home sale, or title contingencies can delay closing by days, weeks, or months, or it can mean the buyer has an out. To win a bidding war, consider waiving common contingencies so the sale looks to be more of a sure deal for the seller. Even if you have a matching bid with another potential buyer, having fewer or no contingencies would make your offer look better to the seller.
Get preapproved for a mortgage
By far, the best way to have the winning bid is to have faster, more assured access to the necessary funding. A preapproval shows the seller that you’re serious and they don’t have to be concerned about financing falling through. Even better, a mortgage that can close well within the seller’s intended time frame can seal the deal.
MBANC can get you preapproved for a mortgage you deserve even if you need a jumbo loan or have non-traditional income streams. Not only will you get highly competitive rates on mortgage products like a 10-year Interest Only mortgage but most deals can reach close in 30 days or less. Find out more about how MBANC can help you win a bidding war on the home you want.