Bidding wars can be exciting for some, but they can become a nightmare if you aren’t careful or working with the right agent. When I am involved in a bidding war, there are a few things I immediately discuss with my buyers.
First, I make them aware of the transactions in that specific local market, community or building, and follow up with a full review of all comparable properties that have been sold recently. If the asking price is below market value and the market is hot, I advise to come in over asking price at the value they feel the property is really worth. For example, a property listed at 20% below market value creates a huge buzz. Come in at 10%-15% over asking price and you’ll still be getting a great deal if you plan on living in the home.
While I’m preparing the research, I ask my buyers to write a compelling letter to the sellers, including how excited they are to start the next chapter of their lives in that home, as well as plans they may have for the home such as hosting their first family Thanksgiving weekend, or watching their baby’s first steps. Most sellers naturally have an emotional attachment to their home. By associating positive intentions with buying their home, sellers are more likely to be swayed by your offer because they feel a connection; even if your offer is inferior to another.
A great example of this strategy is a deal I closed with a handwritten letter including cute family photos, delivered by an adorable 3-year-old in her toy car peddling up the driveway with her big sister in tow as if the house was theirs already! Our offer was lower than most, required a longer closing, and had a finance contingency up against a higher all cash offer with 2-week closing! The 3-year-old and her 5-year-old big sis sealed the deal. The seller’s agent called me infuriated that the sellers were refusing to discuss or even see any other offers because they had fallen in love with my client’s family and wanted to see the pictures we’d promised them of the two daughters growing up in their house. Something else we discussed was the terms of the contract. Since there was a financing contingency and I knew we were up against cash offers, my buyers chose to be as aggressive as possible with the terms by not requesting any repairs or additional money to be spent by the seller. We let the sellers choose the closing date that fit their needs that also met the needs of the lender. The inspection was done within 2 days even though we chose a 5-day inspection period.
You can find small things to repair on any property, even one with brand new construction. So don’t bother with the small stuff if having that home means much more to you than replacing a few light switch covers, an old ceiling fan, or an oven. Another thing that I always suggest in a bidding war is to pay a higher deposit, which we did in this deal. My buyers escrowed the 20% they needed for their loan as well as provided proof of income and other documents so the sellers would be confident that the financing would go through. The only major contingencies I advise to leave in the contract would be the inspection contingency and anything required by your lender. If you’re paying cash, keep the inspection contingency. If you’re buying it below market value, offer to pay some of the closing costs for the seller.
Regardless of the strategy used, the most important thing to remember in a bidding war or any real estate purchase is to keep your cool, stay within the time limitations, and try your best to leave any emotions out of it until you have the keys in your hand! Then it’s time to relax, smile, have fun, and start your newest chapter. If you are in South Florida I would be honored to work with you in your purchase and if you need an awesome agent in a different area who’s great at negotiating, I’d love to introduce you.