How to Win a Bidding War
The 2020 real estate market has been something to behold. Mortgage rates keep dropping to new historic lows, which is giving more and more people a reason to buy a new home. First time home buyers are taking advantage of these mortgage rates, including millennials. However, current homeowners are also jumping into the fray. Many are trading in their current homes for larger homes to meet the demands of working and schooling from home. Still others have been scooping up vacation homes. Basically, many types of homebuyers are trying to take advantage of low mortgage rates all while home inventory remains low. This has led to a situation where if you are trying to buy a home, you will find yourself in a bidding war. Don’t worry about whether or not there will be other bidders on a home you want. Instead focus on how to win a bidding war.
The Keys to Winning a Bidding War
If you are buying a home in this real estate market, then a bidding war is pretty much inevitable. According to the National Association of Realtors, for every home that has been sold since October, they have received about 3 bids. This is just the reality of today’s market and it is important to prepare yourself for this reality. The team at Streamline Realty has some tips for you on how to win a bidding war for your new dream home.
Get a Prequalification Letter
One of the best things you can do to prepare yourself for a bidding war is to get a prequalification letter. When potential buyers consider purchasing a new home, many put the cart before the horse and start by looking for their dream house. However, it is far better to find a trusted mortgage broker before you ever start looking for a home. This might seem confusing given that there is no need for a mortgage if you do not have a home to buy. The truth is that getting a mortgage broker first will set your home search up for success and give you an edge in a bidding war.
Meeting with a mortgage broker is important because it gives you an opportunity to get prequalified for a mortgage. This should be your first step because it will help you set a firm budget for your home search. It will let your realtor tailor their home search to your exact budget instead of merely guessing at what you can afford. This will make your home search go quicker and it will help you avoid setting yourself up for disappointment. Few things are worse than falling in love with a home that you will not be able to afford.
Prequalification letters help you win bidding wars in two different ways. First, home sellers want to sell their homes as quickly as possible. They do not want their homes to be on the selling block longer than they have to be. Having a prequalification letter will let sellers know you’re serious about buying a home, have the money, and it can happen quickly. The second way it helps you in a bidding war is that it provides you a walk-away point. You and the seller know that you cannot go beyond the amount you have been approved for a mortgage. This limits pointless negotiations and time wasting for everyone.
Write a Personalized Letter to the Seller
One way to set yourself apart from other home buyers is to write a personalized letter to your seller that introduces your family. Not many think about doing this and it could be a great way to distinguish yourself in a bidding war. Homes are not just assets. They are places where memories have been built and shared. There is a lot of emotion that goes into buying a home and selling a home. Introducing yourselves to sellers can help them feel a lot more comfortable about selling their home to you. They want to know that their home will go to wonderful people who will be great neighbors. Introduce yourself, your family, and some details that let them get to know you. Bidding wars do not always come down to dollars and cents. Emotions and sentiment play a role. Look at the sample letter we’ve provided to get ideas.
Get an Experienced Professional Realtor
Getting a professional and experienced realtor to help you buy your new home is a huge asset in a bidding war. Experienced realtors who know your market inside and out can give you a huge advantage. First, they have a large stable of clients, many of which they will be selling homes for. This means that they have all of the insight as to what the selling is looking for and can help you position your offer to be the best. However, even if you’re not buying a home from someone represented by your realtor, an experienced realtor can make all the difference. Having someone who knows your market will help you make the right offer to get your home without having you outbid yourself. They understand comparable home values and can craft an offer that is fair to you and the seller. This alone can make a difference.
Final Thoughts
The idea of being in a bidding war to buy your dream home can be stressful. However, it is a bit of a given if you want to take advantage of today’s low mortgage rates. Don’t be overwhelmed by having to compete with multiple bidders. Instead, do everything within your power to prepare for this reality, so that you can walk away with the home of your dreams. One bit of a caution to keep in mind is that sometimes the wars you win are the ones you do not fight. It is better to walk away from a home than to pay far more than its value or what you can afford. If you are working with an experienced and established realtor then you should have multiple options to choose from.
If you are looking to buy a dream home and you need an experienced realtor to guide you through this competitive market, contact us! The team at Streamline Realty is here to help you through every bit of the home buying process, from finding a home to winning a bidding war. We will give you the tools you need to be confident in buying a home in today’s seller’s market.
