Purchasing a home can be a stressful situation, especially for a first-time home buyer. However, when you add in the possibility of a multiple offer scenario, things can go from stressful to overwhelming very quickly. The human race is quite emotional and losing the home of your dreams to another buyer who outbid you can be heartbreaking. Sometimes, it’s not even about a higher bid, but about multiple offer coaching.
Despite the fact that buying a home is hard when you’re working against multiple offers and other home buyers, it’s not impossible. When you implement the right strategies, you’re improving your chances of securing the proposal in a seller’s market and getting the home of your dreams. You can use some of these tips to help you with it.
Have Your Pre-Approval Letter
If you are serious about purchasing a home, one of the first things that you should be doing is meeting with a lender, or mortgage broker to secure your mortgage pre-approval. In fact, if you’re looking at homes with a Realtor, you should already have this approval. Think of it this way: if you were selling your home and had two potential buyers, but only one had a mortgage pre-approval letter, which offer would you accept?
It’s simple. When you’ve secured a pre-approval letter, it shows the seller that you’re a serious potential buyer, and that you have the financial means to purchase their home. If you haven’t developed a relationship with a lender yet, but you have a realtor, your agent can offer you suggestions. It’s recommended that working with someone local is best.
The majority of potential home buyers don’t know what earnest money is, and how it can make a dramatic difference in your written offer. Usually, earnest money is up to two percent of the purchase price. For example, on a purchase of $250,000, the earnest money would range between $2,500 and $4,000. In a multiple offer situation, you might up your earnest money to $6,000 or $7,000, so your offer is ahead.
Buyers of a home only pay the Seller the earnest money once their offer is accepted. However, if you decide to back out of the deal or it falls through for the reason that doesn’t get covered under a contingency, the seller keeps the money. Essentially, it acts as a small down payment and security measure for the seller. However, once the deal is said and done, the money then gets applied to your closing costs or your down payment.
Contrary to popular belief, buyers and sellers have the same goal, so you should be working with the seller and not against them. Flexibility is vital once your bid has won in a multiple offer situation, but that doesn’t mean that you’re in the clear. The steps that follow a bid acceptance are critical in ensuring that your deal stays together.
Your seller had other options, and they’re going to continue to have those options even after they accept your bid. Being sensitive to their needs and flexible with negotiations is going to make the process seamless for you both. For example, if you’ve written your offer to be contingent upon home inspection, make sure that you’re selective about what you’re asking the seller to repair or pay for. In a seller’s market, it’s very likely that they could back out of the deal if they find your demands aren’t feasible.
Offer More Money
Regardless of where you live, the idea of offering an amount over the listing price for a home probably has you shaking your head. However, the reality is that you just might end up doing it. When you’re competing against multiple offers in a seller’s market, the chances are that the winning bid is going to be one above listing price. In fact, many sellers even underprice their home to create a bidding war.
If you truly love the home that you’re putting in an offer for, you might as well just go for it; especially when you know there are other offers. You can use the advice from your realtor who is going to negotiate on your behalf, as well as let you know what a fair price is. Ensure that you do your research, too. You’re on a budget, and it’s crucial that you don’t get caught up in the action of a bidding war. Shop smart.
Personalize Your Offer
Whether you’re buying your home or selling it, the process of it all is very emotional for almost everyone involved. As humans, everyone loves a personal connection and enjoys the ability to share experiences; which is why social media is so popular. When you’re purchasing a home, even if you’re not in a multiple offer scenario, try incorporating a personal touch.
By making the real estate transaction about more than just money and the final handshake, you could be making the entire transaction smoother as a whole. Consider writing a letter to include with your offer. You can just introduce yourself, and your family, and let the current owners know what it is that you love so much about their home. You never know, the things that you love about it could be things they like about it, too, and there’s your connection.
Buying or selling a house is an emotional transaction that can be a roller coaster ride. Ensure that you have a professional realtor and a local lender at your side to help you with the process. In addition to the tips above, the success of your real estate transaction is going to balance significantly on the team that you have with you.
Have you ever been involved in a real estate bidding war? Leave a comment below.