Thursday, July 11, 2013

Tips on How to Get Your Offer Accepted in a Bidding War


Tips on How to Get Your Offer Accepted in a Bidding War

As the property market picks up, the chances of buyers finding themselves in a bidding war is also increasing. All you need for a bidding war to start, is one other bid on the house that you want to buy. And the more offers – or potential offers – there are, the more intense the bidding war will become. 
Where is a Bidding War Most Likely to Happen?
According to research released by a major online real estate brokerage mid-June 2013, the most competitive US markets in May 2013 were:
  1. San Francisco, with 87.9% of offers made on homes facing competition from multiple buyers
  2. Los Angeles: 86.1%
  3. Orange County: 83.9%
  4. San Diego: 72.6%
  5. Boston: 68.1%
  6. Seattle: 67.4%
  7. Washington DC: 66.8%
Interestingly, it was also in San Francisco that the highest percentage (96.8%) of offers were over the asking price; while those over the asking price in LA were only 25% - and the rest varied from 36.1% in Washington DC to 60.9% in San Diego.
So how do you get your offer accepted if you do encounter a bidding war?
Ten Tips to Get Your Offer Accepted in a Bidding War
  1. Offer your top offer up front. Remember this is a bidding war. All you need to do to lose your bid on the house is to offer less than the next person. Find out what similar properties in the neighborhood have sold for recently and base your offer on this. 
  2. Add an escalator clause. This is essentially a clause that asks for the right of first refusal to beat a higher bid. You can put in a figure that you will increase a higher bid by; just be sure to specify a cap.  
  3. Offer cash. If you can make a cash offer when you are buying a house, do so. As the old saying goes, “cash is king”. If you don’t have sufficient cash, go to the bargaining table with as big a down payment (or deposit) you can rustle together.
  4. Have at least 20% for a deposit. If you hope to get your offer accepted, you’re should have at least 20% of the offer in hand. Apart from anything else, banks generally won’t lend more than 80% of the purchase price. 
  5. Check your credit record. Four to six months before you plan to buy, check your credit record and pay off as many debts as possible. If there are any “errors” on record, dispute them. It stands to reason that someone with a squeaky-clean credit record will win the bid on a house over someone who has one or more bad debts. 
  6. Get a preapproved home loan. Truth is there are not that many people who are able to bid on a home with cash only. The next best way to get your offer accepted is to have a guaranteed mortgage. 
  7. Have your paperwork ready and available. In a bidding war sellers will tend to accept an offer from a buyer who is able to prove he or she has cash, a holding deposit and/or a preapproved mortgage. So have this proof with you when you put in your bid on the house. 
  8. Minimize contingencies. There’s no point on taking unnecessary risks, but keep contingency clauses short and sweet. For instance, there’s no reason for you not to include a home-inspection contingency, but guarantee it will be done within a limited time period (a week to ten days). If you lose out on buying a house because the seller doesn’t accept your contingency clause, so be it. Chances are there is a problem. 
  9. Meet the seller’s timelines needs. Sellers sometimes need time to find another property, or to relocate. In this instance, consider offering a rent back or lease back option for a specified period of time. 
  10. Introduce yourself to the seller. Real estate agents sometimes advise their clients to connect with the sellers, especially when they are relocating from another state, and haven’t met fact-to-face. You might be surprised how many people actually care who buys the house that has been their family home for many years. 

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