23 Jul How to Win a Bidding War When Buying a Home
You’ve finally found your dream home, and you’ve decided to make an offer. Unfortunately, there are others looking at that house, and they’re prepared to launch a bidding war to get it. This may seem dispiriting, but there are some things you can do to come out ahead.
Increase Your Amount of Earnest Money
Earnest money is the deposit that you put on a property after the sale’s closed and your offer’s accepted. If you’re able to up that deposit above what your competitors can offer, then the seller will be more eager to take your offer up. Adding thousands of dollars to your offer might make you nervous, so you should only do it if you know you can pay up. If you can afford it, it’s more than worth it. (Related: Downpayment Assistance for California Home Buyers)
Waive Your Financing Contingency and Get Pre-Approval
This might seem like a dangerous step to take because it presumes that your loan will be approved. It can be worth it, however, if you have a fairly high credit score and can be confident of approval. A good way to do this is to find a lender who can grant you a pre-approval for a fully underwritten loan. This will require a lot of patience since many banks and lenders won’t grant you a pre-approval. You’ll also need to do a lot of paperwork and show that you have the necessary finances.
This doesn’t come without risk. If you waive your financial contingency and get rejected, then you’ll lose your earnest money deposit, which is a pretty substantial amount to see disappear. Only do this if you are sure that you can get approved or pre-approved.
Waive the Need for an Inspection
Like some of the other options, this comes with pluses and minuses. Some sellers will be more attracted to offers that waive an inspection requirement if they know that there are potential issues with the property. Others, particularly in more competitive real estate markets, will have had the inspection done before putting it on the market. If that’s the case, they’ll show the findings to any potential buyers. (Related: New Year’s Resolutions for Home Buyers)
If the house is newer and visibly acceptable, then it can be worth taking a risk on waiving the inspection. If it’s older and looks like it needs some work, then don’t waive it. Nobody wants to buy an old house and discover that everything in it needs to be fixed.
Meet the Home’s Owner
Developing personal links with a homeowner can actually go a long way towards your bid’s approval. The first thing you can do is take a look at the owner’s pictures or memorabilia that might be hanging around during the open house. If you have common interests, it’ll be easier to strike up a conversation with them. It’s best to meet them face-to-face if you can, but writing a letter is also an acceptable option.
In either case, you should be honest but appealing. Once you explain to them how much their house means to you, they’ll usually be more sympathetic. This only works with regular home owners since investors are looking for more money rather than a better individual. If you do end up with an investor or another person who can’t be easily swayed, there is another option.
Show Them the Money
If you can offer up a sizable amount of your bid in cash, then that can make you more attractive than some higher bids. The more cash you can give, the more the seller will want you. All-cash bids are the best because there are no worries about denied mortgages. Most people, however, won’t have the cash on hand to pull off such a large bid. Even so, it doesn’t hurt to offer some of your bid in cash and the rest on a smaller mortgage. Another benefit of such a plan is that you’ll end up with lower mortgage payments.
Give Them the Time They Need
For example, give the seller a few extra days after closing to move their belongings out. You can also try to get the closing date closer to that of a property that the seller is buying. If you can promise either of these things, the seller is more likely to accept your bid.