How To Win A Bidding War In A Seller’s Market
Inventory in many areas is low and in Alexandria, it’s severely low. Other areas of Northern Virginia are experiencing the same conditions. Homes are receiving multiple offers within hours of coming on the market. It’s not uncommon for a home that’s updated and priced correctly to see 7+ offers in our market right now. We’re seeing inspections and appraisals waived, financing contingencies waived, escalation addendums, free rent backs, and buyers doing anything and everything they can to be the selected offer.
Your first offer needs to be your best offer. So what can you do as a buyer to stand out?
Financing - at the very least you need to be pre-approved but, I recommend taking it a step further and being fully approved meaning your financials have already gone through underwriting. This means you can if you choose to do so waive your financing contingency. It’s the closest you can get to compete with cash. Sellers want security knowing the offer they select isn’t going to fall through and when they’ve got a pile to pick from they select the best of the best.
Cash - if paying cash is an option that’s highly recommended. I have had a couple of clients who could pay cash but, that wasn’t their first choice. The solution, purchase with cash knowing that they’d then take out a mortgage after settlement. Paying cash doesn’t mean you’re going to be able to negotiate – it’s about the total package. Not just one component of the offer.
Earnest Money Deposit - offer a large earnest money deposit when you are competing with other offers. Standard in our market is 1%-2%, bump it up to 5%. It tells the sellers you’re putting your money where your mouth is. Sellers know a buyer is far less likely to default on a contract when they’re looking at losing $30,000 vs. $6,000.
Be Flexible - cater to the seller’s schedule. If they want a certain closing date to accommodate it. If they need a rent back, accommodate it. Your agent gathering information from the seller’s agent about what their desires are will go a long way. When you’re up against multiple offers you just don’t have the luxury of calling your own shots and if you go that route you’re wasting your time making an offer. I know that sounds harsh but, it’s the truth when you’re competing with other buyers.
Consider A Void Only Home Inspection - there are a lot of buyers who are waiving home inspections all together and if you’re comfortable with doing that, by all means, go for it. It will without a doubt make your offer stand out and be stronger but, know there is a risk in doing it. It’s not something I recommend. Instead, you could opt to offer a void only home inspection which gives you the opportunity to have an inspection but, tells the sellers you are agreeing not to ask for any repairs. If the inspection reveals something that causes you to want to withdraw you can as long as you’re within the inspection contingency deadline. If you opt to have a void the only inspection make the deadline as short as you possibly can.
Appraisal - this is another contingency you can opt to void but, only if you have enough cash to make up the difference in the event of a low appraisal. If you have a certain amount of cash you could keep the appraisal contingency as part of your offer but, include verbiage that you’ll contribute up to X amount in the event of a low appraisal.
Termite Inspection - unless you’re using VA financing pay for the termite inspection. In our area, it’s $35. Yes, it’s a very minor detail however, the smallest of details matter when you’re buying in a hot seller’s market.
Home Warranty - don’t ask the seller to pay for one. If they’re already offering one that’s great but when sellers are in the driver’s seat most aren’t. Although more expensive than a termite inspection at an average of $500 it’s not much on a purchase this large. Looking at the big picture it’s a minor detail when it could make or break you getting the house you love.
This is a general list of what you can do to stand out to sellers. There’s no one size fits all and what you do or don’t need to do varies by market. This is where working with the right agent comes in. You need experience representing your best interests and someone who will provide you with all the information so that you can make a decision you’re comfortable with.