3 Things That Could Help You Win a Bidding War on a Home
With a limited number of homes for sale today and so many buyers looking to make a purchase before mortgage rates rise further, bidding wars are common. According to the latest report from the National Association of Realtors (NAR), nationwide, homes are getting an average of 4.8 offers per sale. Here’s a look at how that breaks down state-by-state (see map below):
The same report from NAR shows the average buyer made two offers before getting their third offer accepted. In this type of competitive housing market, it’s important to know what levers you can pull to help you beat the competition. While a real estate professional is your ultimate guide to presenting a strong offer, here are a few things you could consider.
1. Offering over Asking Price
When you think of sweetening the deal for sellers in Avon, Bloomfield, Farmington, Simsbury and West Hartford CT. The first thought you likely have is around the price of the home. In today’s housing market, it’s true more homes are selling for over asking price because there are more buyers than there are homes for sale. You just want to make sure your offer is still within your budget and realistic for the market value in your search area – that’s where a local real estate professional can help you through the process. Bankrate says:
“Simply put, being willing to pay more money than other buyers is one of the best ways to get your offer accepted. However, it is not always just the price. It is often a combination of Price, Terms and other Conditions that makes an offer the winner. You may not have to increase your price by a lot — it’ll depend on the area and other factors — so look to your real estate agent for guidance.”
2. Putting Down a Bigger Earnest Money Deposit
You could also consider putting down a larger deposit up front. When it was a Buyers Market it was common to put a small earnest money deposit of $1,000 to $2,500 with the offer, Then put down a 3% to 5% second deposit after inspections. Now in this Strong Sellers Market, we are finding in order for Buyers to be the successful offer. They have to put down one large lump sum earnest money payment between 3% to 5% with the offer. An earnest money deposit is a check you write to go along with your offer. If your offer is accepted, this deposit is credited toward your home purchase. NerdWallet explains how it works:
“A typical earnest money deposit was 1% to 2% of the home’s purchase price, but the amount varies by location and by what type of market you are in at the time: Buyers or Seller’s market. A higher earnest money deposit may catch a seller’s attention in a hot housing market.”
That’s because it shows the seller you’re seriously interested in their house and have already set aside money that you’re ready to put toward the purchase. Talk to a professional to see if this is something you can do in your area.
Making a Higher Down Payment
Another option is increasing how much of a down payment you’re going to make. The benefit of a higher down payment is you won’t have to finance as much. This helps the seller feel like there’s less risk of the deal or the financing falling through. And if other buyers put less down, it could be what helps your offer stand out from the crowd.
3. Other Options To Make a Strong Offer give the Seller the Closing date they want
Realtor.com points out that while increasing these financial portions of the deal can help, they’re not your only options:
“. . . Price is not the only factor sellers weigh when they look at offers. The buyer’s terms and contingencies are also taken into account, as well as strong pre-qualified letters, Buyers who go over the asking price are offering to cover any appraisal gap between asking price and Offer price, and most buyers are giving the Sellers the closing time they are asking for.”
When it’s time to make an offer, partner with a trusted professional. They have insight into what sellers are looking for in your local market and can give you expert advice on what levers you may or may not want to pull when it’s time to write an offer.
From a non-financial perspective, this can include things like flexible move-in dates or minimal contingencies (conditions you set that the seller must meet for the purchase to be finalized). For example, you could make an offer that’s not contingent on the sale of your current home, wave your mortgage contingency, and home inspections. Just remember, there are certain contingencies if waived that come with increase risk for the Buyers, like your mortgage and home inspection. Ultimately, the decision comes down to the Buyers risk tolerance and it’s best to lean on a local real estate professional for guidance on what it takes to win the Bidding wars in your market place.
In today’s hot housing market, you need a partner who can serve as your guide, especially when it comes to making a strong offer. Let’s connect so you have a trusted resource and coach on how to make the strongest offer possible for your specific situation.