In a seller’s market, a bidding war can break out on homes in desirable locales. How can you compete without losing your shirt? Find out the tips and tricks for making your offer competitive without overpaying for your new home. It’s not all about the dollars.
1. Choose a reputable lender
You need to have your preapproval done by a lender with a strong online presence, so the seller can find them in a simple online search and know that your financing is solid.
2. Get your preapproval underwritten
A preapproval letter gives you an edge, but what if everyone else has one too? Ask your lender if they can go ahead and underwrite your preapproval and provide a letter to that effect. This shows the seller you are completely ready to sign on the dotted line.
3. Leverage your loan officer
Ask your Loan Officer (LO) to make a few calls. If they contact the listing agent to confirm you are qualified, it shows there is faith in your ability to make the purchase, and could sway the seller to your side of the ring.
4. Pre-inspect, then waive
Never waive a home inspection completely! However, if the home is newer, and you can get a preinspection done that shows it is in good shape, you can “waive” the home inspection contingency in your offer and gain an edge over your competition.
5. Be flexible about the appraisal
Your lender will mandate an appraisal, but if you can absorb a higher down payment if needed to cover a low appraisal difference, you can hang in on the deal instead of walking away. Waiving your own right to back out and working with your lender to take the added risk on your own shoulders can be an attractive deal.
6. Escalate automatically
Add an escalator clause to your offer. This means every step a competing bidder takes will be met by an automatic bid raise just a little over theirs to keep you on top. You can have a preset limit at which point your escalation will stop, and you can reassess to see if it’s worth escalating further.
7. Show you can close fast
A seller may be under pressure to sell fast and overwhelmed with offers. If you have enough of the above advantages, you can confidently set a tighter closing time frame than the typical 30-45 days and hook the seller like that.
8. Rent back the property
A seller might need to close the deal then use the money from the sale of their home to buy a new one. You can offer to rent back the home to them for a specified period of time, giving them a chance to finish their own home buying journey.
Of course, when a bidding war breaks out, you will always run the risk over overpaying if you stay in the fight. Know your limits and when to walk away and look elsewhere.
View loan limits in your area
Rates & Money is your go-to destination for free information about mortgages. Our home buyer guides and home loan articles are designed to help you make informed decisions when buying a homeView