What should we offer in a bidding war? How do we know the right amount?
There is no science to winning out in a bidding war. However, there is a great deal of art involved. Here are a couple of our most effective strategies…
- Buyers, if able, should increase the amount of earnest money deposit – it’s usually not an additional burden for the buyers, and could signal a greater financial ability when sellers are looking at a contract.
- Additionally, if buyers have the ability (not everyone does), pay cash. The old adage, “cash is king,”certainly is relevant in the world of real estate bidding wars. All-cash offers are usually the first offers that a seller will respond to. Why? All prospective buyers can increase the amount of money that they’re going to pay for a given property. However, not all buyers are able to pay all cash. A seller’s best strategic move is to, first and foremost, see if a cash buyer is willing to increase the amount of money that they would want to pay (in cash). So how is it that one goes about paying all cash? There are several options. Perhaps mom and dad can loan a sum of money for a few months time until you can pay them back by securing a mortgage. How about borrowing against your retirement savings? If you already own a property, why not have, set in place, a home equity line of credit that you can draw against? In other words, there are creative means by which one can get their hands on several hundred thousand dollars if needed.
- Always have the pre-approval letter attached to the contract when submitting. Agents representing sellers want to know that the agent representing the buyer has all of their T’s crossed and I’s dotted and that the transaction will proceed without any hiccups. By being thorough with the contract and documents that accompany it, you’ll to signal to the agent that you’re going to be cooperative and make their lives easier.
All that being said, price, of course, is a huge issue. The conversation of how much to offer begins with an agent telling their buyers what it is that they think the property is worth. Buyers should also know that they usually have one chance and one opportunity to impress the seller. In other words, what is the most that they would want to pay for the property without feeling as though they overpaid? For example, if they were willing to pay $100,000, but found out that someone else purchased it for $101,000, would they be kicking themselves? Would they be upset? This often helps to determine what is the most that a buyer would be willing to pay without feeling remorse if they were to lose.
Our Guest Blogger, Mark Siwiec, is an agent with over 28 years of experience. His team of thirteen are responsible for over $63M in annual residential real estate sales. For more information about their services visit www.marksiwiec.com.