With limited housing supply in many highly sought-after areas, bidding wars between buyers have started springing up. For home sellers, this can be a good thing, driving the price of a house up significantly. However, it can also bust buyers' budgets, potentially putting the home of their dreams out of reach.
Avoiding a bidding war is crucial because most buyers are pre-approved only up to a certain amount. If the home cost rises above what you've been pre-approved for, it could require another approval - which is unlikely given that it may necessitate another credit inquiry.
To make sure you secure the home you want, here a few tips for avoiding - and, if unavoidable, winning - a bidding war:
"Avoiding a bidding war is crucial."
Offer a good price early on
While not always advisable, often a bidding war can be avoided if you submit your best - and final - offer up front. Do some research to determine relative home values in the area and keep this research as evidence to back up your offer. If the asking price seems reasonable - or even low - agree to the asking price or offer more to expedite the buying process.
Disclose proof of funding
A buyer with cash in hand, or the equivalent, is always preferable for a seller. Along with your offer, try submitting your letter of preapproval and bank statements to show you can make a sizeable down payment. Showing that you have underwriting already in place and that all that needs to happen is the drafting a contract can go a long way.
Get pre-approved for more than your offer
If you do find yourself in a bidding war, having flexibility in terms of what you can afford to bid can be the difference between losing the house you want and getting a contract signed. You'd rather have more than you need available, just in case.
If the home is a bit of a fixer-upper, waiving some of the optional things that often fall to the seller to fix (cosmetic changes or smaller repairs) can make your bid seem the simplest to take. Do not, however, waive the home inspection, since this can uncover more significant issues that could have a dramatic impact on the home value.
Offer a flexible closing date
Closings can take time and be a hassle, especially if your seller has a specific timeframe in mind for when they want to transfer ownership. Showing flexibility and accommodation in the realm of closing can make your offer more attractive. For instance, if the seller can't move out until a certain date, offer to buy the home then rent it for a set period of time to the seller, giving them ample opportunity to get their affairs in order.
The mortgage experts at New Penn Financial want to make sure you secure the home you want. Call us today to get started.