It’s Sunday evening, and John and Mary Homeseller and their Carroll County real estate agent are sitting at the dining room table. Together, they are ready to confront a pile of offers from buyers who want to purchase their home. The Homesellers were smart to listen to their agent’s advice and decided to entertain all offers simultaneously, rather than have them trickle in.
It’s a hot seller’s market in Carroll County, and the Homeseller’s own an attractive home, which is priced to sell. After all, homes that are priced correctly from the beginning have 2 advantages: they often receive multiple offers, and the home sells quickly. One of these offers will win the day. Which one? And, why weren’t the other offers chosen instead? What does the winning offer have that the others do not?
They have loan pre-approval
Homeowner’s consider a buyer’s ability to purchase when reviewing offers on their home. Even a suspicion that the buyer may have trouble qualifying for a mortgage could cause the seller to eliminate that offer from consideration. The competition took the time to prepare for the war by seeing a lender and going through the pre-approval process.
In Carroll County, real estate agents will always make sure their buyer clients have spoken with a lender or two. It is extremely important for buyers to determine if they are eligible for a loan, what type of loan will best meet their needs, how much they can afford. The lender will then issue a pre-qualification letter. They may have even gone so far as to request a letter from the lender stating they’ve completed the underwriting process and they’re ready to go, pending the home appraisal. Benjamin Franklin was right. “By failing to prepare, you are preparing to fail.”
Their offer contains an escalation clause
Suppose Mr. and Mrs. Homeseller are asking $250,000 for their lovely home. Since your competition knows there will be multiple offers, their aim is to submit the cleanest, strongest offer possible. So, they ask their real estate agent to write the offer at full price with an escalation clause. They are willing to pay $2,500 more than competing offers up to a specified maximum – an amount they are comfortable paying. In essence, this buyer’s offer will increase incrementally up to that maximum.
Is this a smart move? There are two schools of thought — yes and no. Those who think it’s a wise move say the strategy shows that you are serious in your desire to win the home. And, in fiery real estate markets, the strategy grabs most sellers’ attention. However, the house must appraise for the higher price being offered. The naysayers feel that buyers may get carried away and place the maximum bid higher than they can live with should they win the bidding war. If you aren’t comfortable with an escalation clause, your agent can request that your offer be held in backup in case the accepted offer falls through.
Your offer has too many contingencies
Think about the scenario painted at the beginning: Mr. & Mrs. Homeseller and their pile of offers. Unlike kids in a candy shop, they and their agent will scrutinize every line of every offer, down to the smallest detail. While we may not know exactly what their hot buttons are, we do know they want top dollar. So, naturally, the offering price will be the first place in the contract they look. After that, they will scrutinize the terms of each offer.
How many contingencies is each buyer requesting and how long do they want to be able to take to fulfill them? What inspections are included in the offer? How long will it take to get the loan approved? Are there any deal-breaker contingencies, such as the buyer needing to sell his or her current home before consummating this deal? Offers with too many demands and lengthy contingency periods will most likely end up at the bottom of the pile. The competition that wins the home won’t ask the seller to buy him a home warranty, pay for closing costs or get nit-picky on the repairs he wants the seller to either make or pay for.
They have more cash than you
The all-cash buyer has an enormous advantage over buyers who need financing to buy the home. If you can’t pay cash for a home in Carroll County, a larger down payment will be attractive to the seller as will proof that you have the funds to close the deal. When making an offer on a home, an “earnest money deposit”, also known as “good faith money” is always included. This is in the form of a check that only gets deposited after an offer is chosen. Some sellers are impressed with a larger earnest money deposit and that strategy just might provide an advantage in a bidding war situation.
They did their homework
Another reason buyers often lose the bidding war is because they were outsmarted by the competition. The competition hired the right real estate agent who painstakingly researched current market value in the neighborhoods so they knew exactly how high to bid and when to stop.
Deciding on a price to offer requires research, and listening to your real estate agent. The offer price should never be based on an estimated value on Zillow. The offer price should never be a certain-percentage under list price. The offer price should never be a guess, or an attempt to “low-ball”. None of these tactics work. Think of it like this: the listing agent has already painstakingly researched the value of the home, and has shared it with the sellers. Likewise, having your buyer’s agent do the research, and making an offer based on real, up-to-date data, will improve your chances of having your offer chosen.
A very important point to keep in mind is this: If you are obtaining a loan to buy a home, you will NEVER pay more than it is worth. Why? Because all homes for sale in Carroll County are subject to an appraisal when a loan is involved. The house must appraise for the purchase price or less. If it appraises for more, the loan will NOT be approved. What happens then? The seller will be asked to reduce the price to the amount on the appraisal.
They’re faster than you
If you’ve missed out on any number of homes by not being among the first to view them, you understand that time is of the essence in a sellers’ real estate market. Sure, it’s challenging to create time in your day, especially at the last minute, to tour homes for sale, but it’s a must if you hope to be competitive in a multiple-offer situation.
Your competition often receives notifications of new listings as soon as they hit the market. Their agents are on top of their game by vigilantly seeking listings that fit their clients’ criteria. Like any battle, it’s incredibly hard to win a bidding war against an equally matched foe.
Thinking about buying a home in Carroll County? Here’s what to do…
- Whether it’s this year, next year or beyond, the time is always right to get all the facts, and learn about the process. The more you know in advance, and the better prepared you are, the better your chances of having your offer selected.
- Sign up to receive listings of homes for sale as soon as they hit the market!
- Enlist a buyer’s agent who will help you hone your tactics and strategy. For the best chance of prevailing in your quest to buy a home,