How to Prepare for a Bidding War - Buying a Home in the Housing Crisis
We recently purchased a home and understand the difficulties. Bidding on a house can be very intimidating during this housing crisis. You're expected to make a bid that's higher than asking without any stipulations within a few days of the listing being up. That's just not enough time, so it's best to be prepared when you're ready to place a bid.
You've been looking for a home and you're about to make an offer. Here are some helpful things you should know before making your offer.
You only get One Bid. (Maybe Two if You're Lucky)
Bidding' wars aren't actually a back-and-forth thing. It's more like the listing agent listed the house under market value, hoping to bring in more interested buyers, and causing a buying frenzy for the property. Everyone gets one bid. The homeowners review their 20 bids, there is no back and forth.
On rare occasions when you're the only person who bids on a home, there may be a chance for a second bid as the homeowners may want more money or different closing terms. Be prepared with your highest offer, know your budget and what you can afford as your monthly expense.
Have a Good Realtor
It seems that everyone is a real estate agent nowadays. It's important to have a good realtor that is representing your interest. The realtor can let you know how many bids you're up against for the property. Remember that realtors also get paid when they're helping you buy a home, so if you're bid is higher, they will also get a higher commission. Many realtors work in the same office and both benefit when you're bidding over-asking for a property.
Speak to Multiple Realtors, Don't Sign a Buyer Representation Agreement until You're Sure
It's okay to speak to multiple realtors if you're unsure who to go with. You'll come to see some realtors are more active and will be sending you listings that you requested, while others don't even bother wanting to show you the property cause you're not from the area. Don't tie yourself down to a realtor if you're not sure they're the right one, ask about their experience and ties within the neighborhood. You want someone who understands the area well, who can give you a tour or share their experiences living in the area.
Understand the Market Value of the Neighborhood. See Comparable Previous Listings that Recently Sold, a House is an Investment
Ask your realtor for listings of homes that were recently sold in the area to have a better understanding of what the homes were sold for. You'll be surprised to find out that in some areas homes have been selling close to asking or even under-asking. This gives you a more comfortable idea of how much you should pay for a property in that area.
Last-minute Bids. Have a Good Realtor On-call During Bid Day.
Yes, it's a super busy season for realtors but they should be available to keep you updated on how many bids you're up against for the property. They should be available on the date when bids are being taken. Put in a last-minute bid, you'll be in a better position when you know how many bids you're up against. There will always be one person who bids higher, one that bids lower, but they may have stipulations. Don't be disheartened if there are a lot of offers, place your offer anyway, maybe you'll get lucky.
In case you're lucky to be the only bidder, there may be some negotiation between you and the current homeowner with regards to price or closing terms. Your realtor needs to be available all day.
Have Your Deposit Ready
Your deposit will be required within 24 hours of your bid. Be prepared to put down 5-10 thousand depending on the seller's requirements.
Remove Financing Stipulations
The most important thing that home sellers are looking for is a quick sale. Most homeowners will go with a lower bid that has no financing situation or home inspection. Make sure you have enough budgeted for renovations and unexpected repairs as many homes are selling without clauses.
Hope some of these tips help.
Happy house hunting.
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