Buying a home in this crazy market can be challenging. On a recent listing, I received 17 offers and had 55 showings in 58 hours. With that level of competition, every home buyer needs to find a way to gain a competitive advantage. When you are trying to buy a house, think about these things:
- Always lead with your best priced offer. In this insanely competitive market, sellers are not interested in low-ball offers. The home with 17 offers only had two offers below the list price. They were thrown out with no consideration. Why consider an offer $110,000 below list? There was also one $50,000 below list. There were multiple offers above list. One was $65,000 above list. Most of my recent sales have sold over the list price. Ironically, the offer that won the 17-offer deal was not the highest price. That brings up another consideration.
- Contingencies. There are some contingencies that sellers are accustomed to expecting. A loan approval, an appraisal and a home inspection are common contingencies. A home sale contingency is one that most sellers will choose not to work with if they have other offers without a home sale contingency. If you must sell your home before you can buy a new home, you may want to start that process before placing an offer on a potential new home. If your offer has a home sale contingency but it shows that your home is under contract with a closing date specified, that makes your home sale contingency a little more palatable. It will still be lower on the list of desired options, but it may not get thrown out upfront.
- Contingencies 2 – Loan Pre-approval. You would be wise to get pre-approved prior to searching for a home. This is the not the same as a pre-qualification. A pre-approval carries a little more weight with a seller. With a pre-approval, you have gone through the process of proving to a lender that you are financially stable by submitting tax returns, show bank statements and pay stubs. Taking this step up will help you be qualified to buy a home and prove that you have the capacity to make the payments.
- Contingencies 3 – Home Inspections. Another contingency that can put a snag in your home-buying process is a home inspection. I would never encourage anyone to avoid a home inspection, but there are alternatives to having an inspector schedule an appointment after home goes under contract. If you know a contractor you can depend on, you may want to ask him/her to accompany you on the showing. He/she can go through the property and assess the condition during the showing and advise you as to whether a home inspection is necessary. I am a Virginia state contractor, as well as a VA Real Estate Broker, I am checking every house out prior to my clients making an offer. I will point out issues that need attention and on rare occasion, I may encourage them to move on if I see something that is a serious problem with a high dollar repair cost.
- Closing time. The closer the closing to the offer, the more serious you look. Some sellers will not be able to accommodate a quick closing, but when you offer one, you show the seller that you have everything prepared to buy the home and you only need their approval to ratify and start the process. On occasion, a seller will ask my buyers if they can close a week to a month later to accommodate them closing on the house they have under contract. It rarely fails. The home with 17 offers closed in 15 days from the date of the offer. The seller was ecstatic.
When all the 17 offers were laid out and reviewed, here is what we found:
7 were over list price. One was 16% over list, but the one that was 7.5% over list was the one chosen.
2 had home sale contingencies, and the owners had not listed their homes yet.
5 had escalation clauses which meant their offer price would rise to a designated amount until it reached a maximum bid.
3 had no home inspection.
14 had home inspections for information only.
16 had loan approval and appraisal contingencies.
The winning offer was 7.5% over list price, no home inspection, cash with no appraisal contingency and it closed in 15 days. With conditions like that, it was hard for the other bids to compete. The seller needed to sell quickly for the highest offer and with the least amount of effort. His circumstances did not permit him to have much freedom to negotiate or to do anything beyond list and sell.
Remember, when you go into the market to buy a home, some sellers are going to be just like this seller. This seller was not trying to be difficult; he had his back against the wall and could only accept certain offers based on his position. There are other sellers just like that. You will want to bring your absolute best offer right up front. Be ready to walk away if you cannot make the numbers work. Even if you love the home, remember, never love anything that cannot love you back.
This post was originally posted at Cornerstone Home Sales: Winning in a multi-bid buying situation. #mikecoopersellshomes, #winningabiddingwar, #multi-bidhomebuyingsituation