Would-be homeowners are facing bidding wars again, but this time a lot of the competitors are inexperienced first-time buyers rather than savvy deal makers.
“It’s the best time to buy. Period,” said Creig Northrop, a Realtor with Long & Foster. “You have interest rates still low, you have an $8,000 credit. It certainly does create competition.”
Real estate agents said there are several good strategies to consider when trying to make your offer stand out in the crowd, but most of them boiled down to this: “Go back to the basics,” said Realtor Ellie Hitt, also with Long & Foster.
“The cleaner the offer, the better. Give your best offer up front,” Hitt said. “If you have a certain amount you’re willing to spend on a house, go ahead and offer that. Don’t lowball.”
The first step toward submitting a winning offer is to be armed with a preapproval letter from a lender.
“It’s best to get financing from a reputable, local bank,” Hitt said. “When people work with online or out-of-state lenders, things don’t get done in a timely fashion,” she said, adding there is a higher risk that such lenders won’t complete the deal. “A [listing] agent is going to be looking at that if the offers are similar [money-wise].”
Before submitting your offer, find out what the seller’s specific needs are, Northrop said. These can include a quick or delayed closing date, and possibly using the title company of his or her choosing.
“Your goal in a bidding war is to make the contract so the seller will sign it as is,” he said.
Another approach is to add an escalation clause. This essentially states that the buyer is willing to pay a certain amount of dollars above any other offer, up to a specific ceiling.
“If you make the escalation a strong number, like $5,000 rather than $500, you’re more likely to get it,” said Karen Rollings of Prudential Advantage Realty. “Of course if you make an offer with an escalation clause in it, you’re telling the seller that you’re willing to pay more for the house.”
Hitt uses her own “secret” method. “I go with odd numbers,” she said. “Most people round things off. That’s what everybody’s doing. Why not offer $456,500 instead of $450,000 or $455,000? That extra $1,500 can get you the deal. The seller is more likely to go with it than haggle back and forth with the other offer.”
One controversial strategy buyers have employed is to waive the home inspection or appraisal, both of which Northrop recommends against. There are alternatives, she said.
If you really want to get the house, you can bring the home inspector with you before making an offer, so you don’t have to make it a contingency in the contract, Rollings said.
With the abundance of foreclosures and short sales continuing to force prices down into bargain territory, the likelihood that serious buyers will find themselves in a bidding war is high.
“The market is starting to turn around,” said Northrop, who said he has sold 200 homes in the past two months. “The buyer is going to be saying, ‘I would have, should have, could have,’ but this is the time to do it.”
