With such a saturated market, so few quality homes available, lines outside open houses and bidding wars are far more common than ever before. Knowing how to navigate the market and how to write a contract has never been this important.
Having recently represented the buyers of a waterfront home in Pinecrest, which was a financed transaction, we beat out 20 other offers. Having worked with numerous buyers like this, I have first-hand experience on how to secure the deal when up against numerous offers. This is how we did it.
1. HAVE YOUR FINANCIALS READY
Get pre-approved for a mortgage before you start shopping for a home. This will involve verifying your income, assets, and credit. You will be issued a pre-approval letter which we will attach to the proposed contract when we go to make an offer on a house.
If you plan to pay cash for the house, have a proof of funds letter available. This would be in the form of a bank letter, financial statement, or CPA letter.
2. MAKE THE OFFER & ADD AN ESCALATION CLAUSE
Traditionally, the best way to win a bidding war is to offer the most money, however, intangibles such as attractive terms which decrease seller risk, are equally as important.
Don’t offer the highest price you will pay, offer something competitive, perhaps above asking price, but arm it with an escalation clause up to your highest number. In the escalation clause, offer to beat the highest bid by 2% - 4% of the purchase price, up to your threshold. Doing so will ensure any competing offer, perhaps offering slightly better terms, will be pushed aside due to your higher dollar amount.
3. LESSEN THE CONTINGENCIES
Minimizing contingencies is the second step. Sellers don’t want to have to re-list their home because a contingency that resulted in the sale falling through.
Reduce the inspection contingency to just 5-7 days, remove the financing contingency if you feel comfortable with the purchase price but, keep the appraisal contingency. Also, offer an additional earnest money deposit the day after the inspection contingency period ends to make the seller feel comfortable you will move forward with the transaction.
4. WORK WITH THE SELLER'S TIMELINE
If you have the flexibility, find out the ideal timeline of the seller before making the offer so you can plan accordingly. Know when the seller wants to close, how much time they will need between the end of the contingency period(s) to plan the move, and their reason for moving. Doing this will help your offer stand out amongst the rest.
5. WORK WITH AN EXPERIENCED AGENT
Having closed 26 transactions worth over $19,000,000 since the start of the Covid Pandemic, I know first-hand the pitfalls to avoid and the opportunities to seize for my buyers and sellers. Working with a seasoned professional who can handle the intricacies of complex residential transactions helps ensure you will get the property you want, for the price you want, and in favorable terms.
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