When the real estate market is hot, it’s not always enough to be the first offer in the door. Sometimes, a home seller will have multiple offers to contend with. When that’s the case, it can mean war – or at least, a bidding war! But how do you know what to offer in a bidding war? Is there a “right” amount you can offer to get your dream home?
While there’s no scientific way to win a bidding war, there can be some art involved. If you’re stuck in a bidding war to buy a house, here are some strategies you can try:
Increase Earnest Money
If you can, you should consider increasing the amount of your earnest money deposit. If it’s not an additional burden for you, it can help a seller know that you’re serious and have the ability to purchase the home. Sellers look at all aspects of a contract, not just the offer price, so it’s worth considering this additional cash deposit if you’re able.
Offer All Cash
This won’t work for all buyers, but if it works for you, it can help improve your chances! Paying cash to purchase a home lives up to the old chestnut, “Cash is king.” When it comes to a bidding war, an all-cash offer tends to be the first one a seller will respond to. But why?
Any homebuyer can offer to pay more for a specific property. But not all buyers are able to pay cash, and so a seller’s best move when thinking strategically is to see if a cash buyer can increase the amount of money they can pay, in cash.
If you want to pay all cash, you may not have to have hundreds of thousands of dollars sitting in the bank. For example, your parents may be willing to loan you money for a few months until you can secure a mortgage and pay them back. Or, you may be able to borrow from retirement savings. If you already own a property, you may be able to get a home equity line of credit established to free up cash. You may be able to get creative to get the cash you need.
When making an offer on your dream home, you always want to submit a mortgage pre-approval letter along with your contract. You want to make sure the home seller’s real estate agent knows that you are fully prepared to purchase the house, and that the transaction will be a smooth one. Make sure the agent knows that you are cooperative and ready to make this major financial transaction.
Be Honest With Yourself
When it comes to buying a home, price matters! When deciding how much to offer on any given property, you’ll probably start with your agent letting you know how much the property is worth. Make sure you use your one chance to make a first impression. You want to make sure you’re offering the most you’d want to pay for the property without feeling you’d overpaid. Think about it this way: If you offered $200,000 and somebody else bought the house for $201,000, would you be upset? If so, you may wish to consider raising your offer. This quick test is a great way to determine what the most you’d be willing to pay.
If you aren’t able to offer more money, you may still be able to increase your chances of getting the house you love. Make sure you read our blog post 4 Things You Can Do To Get the House (Without Offering More Money) to see more ways you can come out ahead when buying a home.