Bidding wars have become the new normal in today’s real estate market. From increased home prices to fewer properties on the market leading to more competition and interest, it’s uncommon for home buyers not to encounter bidding wars with other interested buyers.
In the moment of heat, it can be tempting to lead with emotion and do whatever it takes to close the deal. But that’s not always the best option. We’re sharing 6 bidding war mistakes we are seeing more and more frequently and how to stop making them in your home purchasing journey.
1. Stop bidding every dollar you have
With a highly competitive market, it’s safe to assume many homes’ listing prices will go for sale above that price. But that doesn’t mean you should offer every last dollar you have to win the war. While this may win the home in the sale for you, there is often still money that needs to go into the home – and when you put it all in your offer, you’re left with little to no wiggle room.
The home may need cosmetic upgrades, landscaping, additional inspections, paint, furniture, and more. When you have no money left, these areas fall to the wayside. Unless you’re in the position to borrow money from family or friends, we recommend lowering your budget a bit and looking for homes that allow you to save about 20% of the money you’re working with.
If the home doesn’t fit your budget, it might not be meant to be. Remember that you still have more to do with the home besides bid out other interested buyers.
2. Stop bidding with a long list of contingencies
Simply put, sellers often go with the offer that has the least number of contingencies, even if it’s not the highest amount. They don’t want to take into consideration financing that may not be reliable, an interested buyer’s pending home sale, and other factors.
We recommend getting pre-approved by a lender before entering into a bidding war. This gives you a realistic idea of how much money you have to work with, regardless of other potential scenarios. Find out what is important to the home’s seller and try to include that in your offer if you’re serious about purchasing the home.
3. Stop bidding without any contingencies
On the other hand, offers without any contingencies can also be dangerous. Releasing all contingencies means you may waive the right to a home inspection or the ability to back out of the deal if an inspection reveals major flaws.
Be smart about what you’re signing up for and make sure a home inspection is part of the deal. If you win the bidding war on a home that has major structural damage or other issues you’re unaware of, it may not feel like a win at all.
Instead, bid as high as you can comfortably afford and make compromises on other areas such as the length of escrow or your down payment. Either way, never sacrifice the right to inspection as a negotiation point.
4. Stop assuming the buyer will come back with negotiations
Bidding wars can go on and on and never seem to let us. This can mean new offers get put on the table and what felt like a strong offer may quickly get overshadowed. Stop assuming you will have multiple chances to make your final offer. We recommend writing your bid as if it was your only chance to negotiate. This puts all of your cards on the table and can also save you from lengthy negotiations that end in disappointment.
5. Stop calling every offer your ‘best and final offer’
Negotiations are never over until the seller is ready to accept an offer. So this means that the last ‘best and final offer’ may actually have a few more iterations if you’re serious about the property. While you may see TV shows using this terminology, it doesn’t always work in real life.
If a seller sees the terms ‘best and final offer’ but doesn’t love parts of your bid such as the closing date, down payment, or other contingencies, they may not even come back to you for negotiation because you made it clear this was all you were willing to settle on.
Even if your bid is as much as you can afford, don’t tell the sellers that. Keep your options open if they come back to you and reevaluate what they have to say as needed.
6. Stop assuming you know a home’s true value
The strategy behind a bidding war is to place a home on the market slightly below its value to drive up the price and create competition between buyers. This means that the list price is not necessarily what the home is worth – so stop assuming that it is or that you know the true value. Instead of assuming one number means one thing or another, do your research and look at comparable homes in the neighborhood or school district. This will clue you in on recent increases in a certain area, available inventory, and general market trends.
An informed buyer is the best buyer.
Find Your Perfect Property Today
If you’re looking to purchase a home in the Central Pennsylvania area, the team at Matt Weaver Group is here to help. We understand the current market and will stop at nothing to ensure our clients find what they’re looking for.
Contact us today to learn more about available listings and what areas may be best for your needs.