Bidding on a home can be a stressful experience, and the fluctuating real estate market and seller’s mood can raise your blood pressure. You need to be serious about your bid strategy. Here are 4 tips for home buyers:
Make Sure Your First Offer is Your Best Offer
In today’s housing market, bidding wars are common and can get extremely heated. Here are some tips for beating the competition without overpaying. First and foremost, make sure you are pre-approved for a mortgage loan. Sellers will likely be more likely to consider an offer with a pre-approval letter. In addition, multiple offers are common in seller’s markets. Be prepared to negotiate hard to get the best price.
It is often the case that the first offer will be your best offer. However, some sellers will ignore the first offer in an effort to win a bidding war. This will only hurt your home’s value, as the longer it stays on the market, the more likely buyers will be wary. During a hot market, multiple offers can come in within days. Therefore, it is crucial to get the best price when you first list your home.
Avoid Writing A “Love Letter” to the Seller
Writing a love letter to a seller when bidding on a home presents a serious ethical dilemma. The letter may contain enough details for a seller to discern the buyer’s location, school district, and number of children. This may cause them to make assumptions about the buyer, which could lead to a violation of the Fair Housing Act. Moreover, they could reveal personal details that may put the seller off.
Despite the common misconception that love letters are illegal, there is a growing body of research supporting their legality. While love letters are generally not against the law, they are a violation of the Fair Housing Act in some jurisdictions. Regardless of whether or not you have a legal basis for writing such a letter, avoid sending it. You can write a love letter to a seller, but make sure that it is not generic or lengthy.
Include An Escalation Clause in Your Offer
In hot real estate markets, it is often a good idea to include an escalation clause in your offer. This clause allows you to increase your purchase price if you receive an offer that is higher than your original offer. However, if there are no other offers, the seller can counter-offer you for the escalation amount. In other words, if you submit an offer on Monday and receive a counter-offer on Thursday, your offer is now worth double the amount.
One downside to including an escalation clause is that it can cause the buyer to overpay for the home. Many desperate buyers try to push their budget to get a home that they really want. The cap price should never be higher than the buyer’s maximum comfort level, so make sure that the buyer states their upper limit up front. If you’ve already set a price range, you’ll be able to avoid the back and forth price negotiations.
Negotiate with the Seller’s Agent
It’s best to negotiate with the seller’s flat fee real estate agent when bidding on a home, so the two parties can come to an agreement. In addition to negotiating the price, buyers can ask the seller about other conditions, such as whether the seller needs to move out in a short period of time, if a seller’s offer is lower than theirs, and whether the seller can waive any contingencies if the buyer’s offer is higher than the sellers’. In addition to this, they can include an expiration date in their counter offers, which will help to move negotiations along.
When negotiating with the seller’s agent, buyers should remember to remain professional. They should always avoid slandering the other party’s reputation or pulling the rug from under a buyer’s feet. Always remember that it’s the reputation of both parties that matters, not the commission of your real estate agent. Therefore, buyers should always rely on their agent’s expertise when negotiating with the seller’s agent.