You’ve finally found the home of your dreams after months and months of searching. You’re financially ready to proceed to the next step in the home buying process. However, one thing is standing in the way – other home buyers.
In a seller’s market, your worst enemies are other buyers. A seller’s market, like the current landscape of Tampa Bay real estate, is one in which more people are looking to buy than homes available. In this market, bidding wars are all too common and often result in people losing their dream house.
Fortunately, you can utilize a few strategies during a bidding war to avoid an upset and ensure your path to victory. These strategies are outlined below.
Get your pre-approval letter ready
The most important step before you start shopping for Tampa Bay homes for sale is to get pre-approved for a mortgage. Mortgage pre-approval is the process of determining how much money you can borrow to buy a home. It details an exact mortgage amount based on your bank statements, W-2s, credit score, and other official documents.
Getting your pre-approval letter signals to the seller that you’re not only serious about buying their home, but you also won’t have any trouble getting a mortgage on the property. In some situations, it isn’t entirely uncommon for sellers to skip over offers from buyers who don’t have pre-approval.
Submit the highest offer
Submitting the highest offer is typically one of the most effective ways to win a bidding war. While that isn’t always the case, it won’t hurt your chances. Making the highest offer can help set you apart from the competition, increasing your likelihood of winning.
However, you should never neglect your budget and bid higher than what you’re willing to spend. Bidding wars often get emotional, which means it is crucial that you determine your highest price point and walk away if any offers go higher than that.
Escalation clauses
Escalation clauses are an excellent way to put in an offer on a house at a reasonable price while still facing stiff competition. These clauses allow you to one-up a competitor’s bid to a specific price point.
When submitting your offer, your Tampa Bay real estate agent will add an escalation clause that says you will pay a specific dollar amount above any offer, so long as it doesn’t exceed your budget limit. For example, let’s say you submit an offer on a house for $300,000. Your escalation clause could say you agree to outbid competing offers by $1,000 up to your budget of $350,000. So for every bid that’s above $300,000 and under $350,000, your offer will go up by $1,000.
Since the highest offer often wins bidding wars, escalation clauses are an excellent way to ensure your bid is on top.
All-cash deals
While not all too common, people who can pay for a house all in cash usually jump to the top of the pile. In this situation, you don’t need to apply for a mortgage, and the seller doesn’t need to worry about encountering problems with financing. In addition, since there’s no underwriting process needed, an all-cash sale saves time for all involved parties, which means you can close on the house much sooner. This is an especially great tactic if the seller wants to sell their home as quickly as possible.
Personal letters
Not all sellers are simply looking for the highest offer. Many sellers love their home and are looking to pass it on to another buyer who will love it as much as they did. In these situations, attaching a personal letter along with your offer can help you stand above the competition. This is true as long as you follow some basic tips.
To write an effective personal letter, use the letter as an opportunity to introduce yourself and your family in the opening paragraph. You can also explain to the seller what you love about their house and why you want to live there. If your offer is lower than the competition, you can even use the letter to clarify your situation and why you can’t meet the asking price.
Writing a personal letter will cost you nothing, but it may leave a lasting impression on the seller.
Forgo contingencies
Buyers making offers on Tampa Bay homes for sale often include contingencies that are specific conditions to be met before a sale is completed. If the condition is not met, the buyer has the right to cancel the sale.
Since most sellers want as few hurdles as possible, dropping your contingencies can help your offer rise to the top. Doing so signals to the seller you’re willing to make a deal no matter what. However, keep in mind that forgoing certain contingencies could lead to trouble down the road. Therefore, you should be careful when choosing this strategy. Some contingencies to consider:
- Home inspection contingency lets the buyer back out of the sale if the home inspection reveals significant problems or issues with the property.
- Financing contingency allows a buyer to pull out of the contract with little consequence if they can’t secure the needed mortgage. If the buyer cannot get the funds before the closing date, they would have to forfeit their deposit, which means the seller would need to choose between delaying settlement or putting the home back on the market.
- Appraisal contingency enables the buyer to back out of the contract without consequences when a home appraisal reveals the home’s value is lower than the offer price. This means the seller won’t have to renegotiate the sales price or find another buyer.
Offer more money as a down payment
Increasing the amount of money you offer as a down payment is another way to win a bidding war. This is because buyers who can make a larger down payment are more likely to get a mortgage, and therefore, the sale is more likely to go through.Make sure to provide the proper documentation that proves you have the resources and ability to offer more as a down payment.
Keep yourself available
The more personal you are, the more likely you are to win the bidding war. Leave your contact information with the seller and make yourself available. Invite the seller to contact you with any questions about your offer. Also, respond to inquiries in a timely manner and regularly check in with the listing agent to keep track of the seller’s progress. Finally, stay on the seller’s radar as much as you can!
Hire a Tampa Bay real estate agent
Since many buyers are searching for Tampa Bay homes for sale, the area is currently experiencing a seller’s market. In such a market, bidding wars are all too common. To help ensure your path to victory, you need a skilled Tampa Bay real estate agent on your side.
If you’re ready to win the bidding war and secure the house of your dreams, contact Jason McIntosh today.