Bidding wars are usually fun for the home seller, but they can be downright dangerous for a home buyer. When two (or more) buyers are bidding on the same home, it can start to feel like there are no other homes on the market. This usually happens when the real estate market is a sellers market.
In a sellers market, add in the element of competition, and things between a home buyer and seller can get out of control quickly. Before losing your head to a bidding war, keep the following thoughts in mind before deciding to begin or get too deep, into a home bidding war.
Get Preapproved For a Mortgage
Sellers want to see that buyers have done their homework and that they're serious about following through on an offer. A pre-qualified statement is not the same as a mortgage pre-approval letter, so home buyers should get the mortgage pre-approval. The former is a general document based on basic income and price range while the latter has already been underwritten by the lender. While both have the potential to fall through, the mortgage pre-approval is much more likely to put a seller's mind at ease.
Write an Escalation Clause
Some states offer an addendum to the purchase contract called and "escalation clause". An escalation clause states in advance how high a buyer is willing to climb in the event of a bidding situation. This addendum or clause also helps ensure that buyers will not go overboard when it comes to bidding. In some cases, these addendums allow for their bid to stay behind others in case they lose out to another buyer who fails to move forward with the contract.
Sometimes sellers are motivated by more than money — even in the most air-tight of seller's markets. They're looking for buyers who can make their lives easier so it helps if buyers remember this when making their offer. For example, if the seller has to leave the home in a hurry, they may be more willing to accept a bid if the buyer can push up the moving dates. Selling a home can be a very messy time for sellers, so anything a buyer can do to alleviate the confusion or streamline the process can be helpful.
Home buyers should keep an eye out for how to get more leverage whenever possible, which may mean doing research. For example, find out (or ask your agent) if the seller has had offers fail before and why. It's possible that by letting the seller know that your offer will not fail because of that reason (whatever it may be), the seller may take your offer above others.
The inspection process is another area where a buyers offer may stand out above others. Ask your agent how inspections and inspection contingencies are handled in your area or state to give your offer an edge above the rest. For example, if the wiring turns out to be faulty, a buyer may waive their right to ask the seller to fix the problem first.
Bidding wars can be difficult because it's not always clear what's worth it and what should be walked away from. Buyers for Hendersonville homes do have some power to control their destiny though (despite all evidence to the contrary), but they need to know how to use it and what their limits are. It helps to set those limits prior to getting involved in a bidding war and to recognize that buyers will likely need to make a few concessions when they're not the only person who wants the home.
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