Multi Bids and Strategies to Win
Historic low inventory and (still) low interest rates, coupled with ever growing demand of working young professionals, eager to move in their own nest... Is it a surprise that almost any house in market (specially in East) is multi-bidded (above asking price) leaving several unhappy faces?
While good news for sellers, it is tough time for buyers. Indeed emotional roller coaster!
Its important to understand each transaction and strategies accordingly.
Pre-Approved or Pre-Qualified?
(Hmmmm... what's the difference anyways?)
In layman's language - Step 1 Get Pre-qualified and Step 2 is Get Pre-Approved and definitely you would wish to be Pre-Approved in multi-bid.situation.
In a pre-qualification, your credit report isn’t pulled, which means that there’s a risk of getting a less-accurate estimate of how much you can afford.
A pre-approval is the most accurate option. It takes into account verbal information provided by you, in addition to looking into your credit report. This last part is key, since it allows your mortgage banker to assess your current debt-to-income ratio.
Contingencies - to keep or not?
Sure its a risk as buyer you are taking, but waving contingencies does make your offer desirable.
There's no safe tip here, honestly. Each buyer is different and is willing to take risk based on market situation, remember only you have to decide for yourself how far you are willing to go.
Earnest Money - How much is right?
Well, in normal market condition earnest money is token amount (can be as low as a Dollar!), but in multi-bid scenario large earnest money definetely send strong message on seriousness of your offer. How much is right?
Think about it from seller's perspective. If you are selecting from multiple offers, which offer are you likely to pick? The one with more earnest money, Yeah!
Escalation Clause - what's that?
Essentially an addendum that states you are willing to go above asking price in increments (of say 5k or 10k) up to x-amount over asking price.
It's important to understand your budget and plan with your agent accordingly.
Closing flexibility - something to consider?
If seller has unique need, for example, extended closing time or wants early closing, pay attention to these details and prepare your offer accordingly. This will have huge positive impact of your offer overall and could make you winning offer.
Lenders - someone giving lowest interest rate?
Should this be only criteria?
Pause and think... In this market where we are losing offers to cash buyers, its improtant to choose a lender that has in-house appraiser team, as they can control time-lines effectively and provide you the ability to close within 17 to 20 days, if required. As good as cash buyers.
This does make, your offer strong in a very competitive market.
Hiring right Agent - why?
You will get agents who are willing to give kick back but think about it - what you really want?
Someone experienced, with good expertise and market knowledge, who can give you right assessment of how far the bidding war is likely to escalate the price ot the house, to prepare your offer smartly around such information so your offer is strong, and most importantly who can get some information from Listing agent/seller on the expectations - in short really involved in the process and thinking and planning ahead.
It's important who you choose to hire in your property-search, this can save you lot of heart-ache and of course money!