11 Tips To Get The Home You Want

Today’s housing market is markedly different than it was a year ago. Back then, people could offer fewer balls and have a good chance of being accepted. Now, buying a property has become more expensive and complicated, and there are reports of bidding wars across the country, even as we move into a slower selling season.

There’s more to winning a bidding war than troubling other investors with your bank account until the home seller accepts your offer. When buying a property, whether it is a home you are going to live in or one you are acquiring as an investment, it is best to do your research, set boundaries and be strategic. Armed with knowledge, you are more likely to be a winner in your battle to buy property without overpaying.

The following 11 strategies can help your offer stand out and win the bidding war.

1. Establish relationships beforehand

Established relationships with real estate agents and brokers can go a long way. You don’t always have to have the highest offer to win, but you do need to have the offer that the agent likes the most. It often comes down to your confidence in closing and making sure the agent gets paid their commission quickly. If they know you and know you’re qualified, you’ll be way ahead of your game.

As a buyer, you should choose a representative who is experienced, local and well-known. The more respected the buyer’s agent or broker is within the community, the better chance they have of being able to successfully introduce listing agents. While you’re at it, also get in the good graces of the listing agents, as they are the ones who meet with all parties involved in the sale. In a competitive situation, working with a known broker and meeting with the listing agent face-to-face will make the agent feel more comfortable, which will increase your chances of winning, especially if the two offers are very close.

2. Know the neighborhood

Make sure that your expectations are not out of line with your abilities. Some neighborhoods are more expensive. Some have more (or less) popular accommodation types, and all have different types of amenities. There are many websites that compare the prices of properties in each community. Research can help you avoid neighborhoods that are out of your price range or help you find the right location for you. Use these sites to narrow down where you want to buy property.

3. Make a strong offer

It is important to stand out in the bidding war. If you don’t want to pay more, put down a higher earnest money deposit so the seller knows how serious you are. A high earnest money deposit can also show the seller that you are financially stable, and thus less likely to fall through with the transaction.

Remember, though, that earnest money may not always be returned, especially if you don’t close on the property. Be deliberate when putting down a high deposit and understand the contingencies you are agreeing to.

4. Write a Personal Letter

You can write a letter to go with your proposal. Adding your story to your offer can help the seller feel an emotional connection with you. Not only does this put you in a bidding war, but the seller may also feel inclined to be flexible with you.

That being said, it may also influence a salesperson not to choose you. While it is rare, there are a few things to consider when writing a letter to accompany your proposal. Focus on what the home can do for you without forgetting what the home means to the owner. This could be the home where they raised their children or where they have lived for years. Telling too much about you in your letter may cause the seller to consider other offers.

4. Add Escalation Clause

Another way to make a strong offer is to agree from the start to raise your offer if another buyer has a higher bid. You can accomplish this by writing in the contract that you will offer, for example, $1,000 or $5,000 more than the highest offer submitted.

When following this technique, make sure you include a limit on the total amount you are willing to pay, or you can easily exceed what you want to spend. Pick a point at which you will walk away from the property and then stick to it. Getting caught up in a bidding war can be exhilarating, but don’t let the excitement get the better of you.

5. Leave Contingencies

You may be tempted to add a contingency to your offer, especially if the real estate market is moving quickly or you fear something will go unnoticed in the transaction. Types of contingencies include:

• home inspection
• financing
• home sale
• Evaluation
• Topic

That being said, sellers prefer offers with no contingencies. Leaving out contingencies assures the seller that nothing will close at the last minute. This can give sellers more confidence in your offer than other offers they’ve received that include contingencies.

6. Offer all cash

Knowing that speed is the key to winning a bidding war, you should be prepared to pay in cash if possible. No matter how big the down payment, processing and mortgage approval, from the time the offer is accepted till the keys are handed over, there can be a long wait.

Coming to the table with cash gives you a leg up on the competition. Sellers prefer cash offers because they are more reliable, and the sales are less likely to fail at the last minute. However, not all buyers or investors can do all cash transactions.

7. Be pre-approved

If you can’t afford an all-cash transaction, get your loan pre-approved and provide as much cash as is appropriate for your financial situation. Offers with a mortgage pre-approval letter can make the seller feel more confident because the first step in securing financing has already been completed.

Pre-approvals also help you as a buyer by knowing

• how much a lender is willing to give you
• what will be the monthly mortgage payment
• What mortgage options are available to you

A lender looks at your credit score, job history, identification, bank statements, current debt and your completed mortgage application before they can pre-approve you. If you’ve been pre-approved, you’ll receive a specific loan amount they’re willing to lend you, which you can submit with your offer.

8. Act Fast

As mentioned in number 6, speed is a big part of the equation in winning a bidding war. The Internet has greatly increased the sale of homes, with some homes being sold the same day they came on the market for this seller. If the property you want becomes available, don’t wait for the open house and forget the low-ball offer. View the property so that you can rate yourself and make your best offer immediately. You can only get one shot at it, so get all your paperwork in order ahead of time. When the right property enters the market, you can swoop in to get it.

9. Be Flexible

Expressing a willingness to work with the seller’s timeline and requirements can go a long way toward a successful purchase. If the seller wants to stay in the home for a period of time after closing, you can offer to “lease back” or “rent back,” which means you’ll be their temporary landlord until they move out. Will become If you’re bidding on a short sale, make it clear to the seller that you’re willing to wait for the bank’s decision, no matter how long it takes.

10. Buy as is

Be an easy buyer to work with. If you put out warning signs that you’ll be difficult throughout the process, most sellers and agents will shy away from it, regardless of the size of your offer. Instead, keep your offer price the same and draw up a simplified contract. Many sellers will take a lower purchase price in exchange for a less hassle transaction that will close on time. As an added benefit, the same agent or salesperson may one day choose you again. The better your reputation, the more access you’ll get and the better prices you’ll get.

11. Keep Trying

Don’t be intimidated by the high bidders; If you really want the property and think you can make it work, go ahead. Create offers and bids at your convenience, and remember your “running number”. Bidding battles can get emotional quickly, so it’s important to set and remember your financial limits.

If you lose the bid, offer to be a backup in case the accepted deal fails. Remember that not every opportunity will go your way, and it is better to bid and lose than to bid high and pay more.

If someone else closes on the property, start looking for someone to bid. Buying real estate in a hot seller’s market may mean submitting a few offers before you close on your new property.

Bidding wars have been more common for lower assets, but no asset is safe now. Even with all the foregoing information, winning a bidding war still takes some luck. As already mentioned, employ winning strategies and don’t get so caught up that you end up buying a property for more than your maximum price. Do your research, know your limits and be aware of local real estate market values. Being equipped with the proper knowledge can give you an edge over the competition, allowing you to outbid them without over-bidding.

Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.