Monday, July 13, 2020 / by Vanessa Saunders
By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems Real Estate.
As people anticipate an economic recovery this summer, more home buyers are actively entering the Hudson Valley housing market. What some buyers will be surprised to discover in this seller's market is that unlike the last recession, prices are rising, not falling. The difference this time is the severe shortage of homes for sale. Buyers should expect and be prepared for getting into bidding wars when they make an offer on a property. As bidding wars go, there are going to be more losers than winners. As a buyer, you should be prepared for the battle. Here are some ways to get an edge over other buyers that do not involve upping your price.
Be ready with your pre-approval paperwork.
Sellers want strong offers from strong buyers, buyers who are prepared to see a contract through to closing. Show you are serious by having a pre-approval letter from your lender. (Not just "pre-qualified." There is a huge difference.) Make sure your lender draws up your approval letter specifically for the property you're bidding on to further drive home the point that you are ready to buy.
Increase your down payment.
This tells a seller you are a more desirable buyer because a higher down payment means you'll be borrowing less. This is also effective if the bidding war is pushing the price higher than the appraised value your lender may allow.
Waive your contingencies.
A variety of things can be contingent in a transaction. For example, a purchase may be contingent upon no significant issues found during inspection. There is a risk in waiving contingencies though, as you might imagine. Your contingencies give you the wiggle room you need as a buyer to renegotiate terms and price. So if you waive your inspection contingency and then find out during inspection that the home has serious foundational issues, you’re either going to have to sacrifice your earnest money or pay for expensive repairs once the title has been transferred.
Pay with cash.
"Cash is king" is no more evident than in real estate negotiations. if you have the cash to cover the purchase price, offer to pay it all up front instead of getting financing. Not only are you eliminating the need for a third party to get involved in the deal, you’re also showing the seller that you mean business. This is especially forceful given today's record-low mortgage interest rates.
Include an Escalation Clause.
An escalation clause is an addendum to your offer stating that you are willing to increase your offer by a pre-determined amount if another buyer matches your offer. If winning a bidding war on a house is the end result you’re looking for, there’s nothing wrong with putting it all on the table and letting a seller know how serious you are.
Speed up the process.
Getting to closing usually provides a benefit to both the buyer and seller. Having the ability to speed things up by, for example, being able to offer to do the inspection right away. This may be easier said than done in today's market because inspectors are overwhelmed and can be difficult to schedule at short notice. If you can offer a quick inspection, the seller doesn’t have to worry that by accepting an offer and taking their property off the market they’re wasting time that could be spent getting something better.
Winning a bidding war on a house takes a bit of strategy and a bit of luck. Your Global Property Systems local area specialists can help guide you through each step of the buying process so that you know you’re making the right decisions at the right time.
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