As of April, 69% of all homes that were sold this year in the Denver area were involved in bidding wars – meaning almost three out of every four homes that you tour will be involved in a bidding war. Use these tips to help you successfully navigate the bidding process.
1. Act Fast
If you like the home, don’t hesitate, make sure your offer is one of the first ones in the hands of the seller. Also, make sure you make a decent offer, now is not the time to low-ball if you know a property is expected to receive a number of offers. A low-ball offer will get thrown in the trash.
2. Escalation Clause
An escalation clause can give you one of the best chances to win a bidding war. This is how it works – say you submit an offer for $400k on a home, but you include a clause, that in the event of a bidding war you are willing to bid up to $450k, but no more than $1,000 over the highest bid. So, if there’s another bid for $430k, your offer is only good for $431k. You can also make escalation clauses valid for set number of days, so the seller could come back to your offer if the initially accepted offer does not work out.
3. “As-is” Offer
Sometimes you can get a pre-inspection before placing an offer. It is a little costly, but if you really like the property and want to put in a strong offer, a pre-inspection will help you gauge how much you offer.
If you submit your offer as an “as-is” offer, it means that you will not be asking the seller to fix anything that comes up in the inspection. There is usually a contingency that allows you to back out if you do not like something that comes up in the inspection. Aside from a cash offer, an “as-is” offer is one of the most attractive offers to sellers.
4. Write a Love Letter
Selling your home is an emotional process, often filled with memories. Send along a thoughtful letter and a picture of your family with your offer telling the seller how much you love their home, about your family, and about the memories you would love to make there. This “humanizes” you offer and helps you connect with the seller.
5. Prepare Your Financials
If you can, pay in cash. These are often the most attractive offers, because the seller does not have to worry about financing falling through. If cash is not an option, be sure that you get pre-approved for a mortgage in the amount of the home you would like to buy, or more.
6. Cover Seller’s Costs
In competitive markets, it is almost standard to expect the buyer to cover the seller’s costs. Be sure to include this in your offer to make it more attractive to the seller.
7. Buy Furniture
Moving is not fun, but it can be made better with less stuff. Offer to buy the seller’s furniture in your offer if they did not indicate that they would like to keep it. Also, it will be nice for you to have a fully furnished home when you move in, so it is a win-win for everyone.
8. Make Multiple Offers
This is a stressful strategy, but sometimes in a competitive market, buyers will put down offers on two or three properties and see what shakes out. However, if any of the sellers get wind of this, it could make your offer less attractive and make you look non-committal. If an offer does get accepted, be sure to pull the others.