With the spring market right around the corner, buyers need to do all they can to make the strongest offer when the right house becomes available. Implementing some of the following tactics will help to set their offer apart from others in a bidding war.
Pre-Approval Letter
Have their lender keep their pre-approval letter current, within 20 days, and if possible, specific to the property you’re bidding on. Help guide your clients to choose a lender that is committed enough to go to bat for them in a bidding war. They should be well known, respected among agents in the area, and highly specialized in mortgage lending. If this is the case they’ll get on the phone, with the listing broker, after hours if required, and vouch for your client; that they’re fully qualified for the loan and that their documents have been reviewed entirely.
Be Readily Available to See Homes
Be prepared to see a house whenever the seller allows. Do anything you can to give your clients a head start on the offer process.
Compose a Personal Letter
Sellers are often more likely to choose a buyer with whom they feel comfortable. A home is typically someone’s prized possession and they want to know it will be cared for like they have. Have your client send that message with a heartfelt letter showing how much they love the home. Appeal to their emotions.
Offer Over Asking
In some cases sellers price their homes aggressively to incite bidding wars. We know that in a multiple offer situation the home is likely going to sell over asking price. The tricky part is figuring out how much over asking price. What you need to do is advise your buyer to offer as much over as they can and as they are comfortable with.
Consider having your buyers look for homes under budget to allow for wiggle room in their available funds so they can put their best foot forward. If you widen their search bracket to reflect homes $50K under their budget, they may have an easier time winning a bidding war because they’ll be able to offer much higher than the asking price.
Escalation Clause
In certain circumstances, an escalation clause can be a great tool to raise buyer’s chances of beating other offers. It allows them to offer the seller a certain amount over their highest offer up to a pre-determined price.
Consider Waiving Inspection
The buyer can waive the home inspection, which is the most aggressive way for your buyer to show they’re serious about the property. Or they can opt for the inspection and include in the offer that they’ll cover up to a certain amount of the estimated repair cost. If you go this route, be sure it’s a high number or it won’t be attractive to a seller. Buyers have typically allowed for $5,000 – $10,000 in repair costs- but in a bidding war, these numbers may not be enough. This gives the seller confidence that they are fully committed to purchasing and that they won’t attempt to renegotiate or back out of the sale.
Shorten Contingency Time Frames
Shorten the inspection window, purchase and sale date, and mortgage contingency if possible. Have your buyers speak with their lender to determine the earliest mortgage contingency date.
Increase Your Down Payment
Sellers may feel a buyer with a higher down payment of 10-20% is more qualified than a buyer with a 3.5-5% down payment. Have your buyer consider putting more money down if they’re able. Borrowing from their 401k could be a valuable option to bring their down payment to 20% if it is possible. Although this is a loan that they’ll need to repay, they’re repaying themselves technically and there are typically a variety of repayment options. Submitting the offer with a larger deposit is another way to strengthen the validity of their bid. Most buyers include a $1,000 deposit with their offer and then an additional at the purchase and sale. Why not put $5,000 in at the beginning if they’re going to have to anyway at the end?
Be Flexible on Closing Date
Some sellers have inflexible circumstances and will need to sell to a buyer who is willing to accommodate their time frame. Stress the important of your buyer being as accommodating as possible on all fronts to make themselves stand out!
Use & Occupancy Agreement
Have the buyer consider allowing a “rent back.” Some sellers need to stay in the home for a brief period of time after they close until they can move into their new home. This is known as a Use and Occupancy agreement and can provide some benefits to the buyer as well.
Buyers see the benefit of a U&O agreement if they’re in a lease they don’t want to break or if they’re in the midst of selling a home and want to close that deal before they worry about packing up and moving right away. Another benefit is that they can lock in an attractive rate by closing earlier- closing later to accommodate the seller’s timeline could leave them vulnerable to having to pay a rate lock extension.
Winning a bidding war is not an easy process and your buyer’s may not get what they want the first time, but trying these tactics can help!