Bidding War – The Arizona real estate market, specifically around Scottsdale and Phoenix is extremely hot right now. New construction homes or even entering into a lottery system for homebuyers due to the amount of demand. This isn’t to say that resale properties are falling by the wayside, however, new construction is definitely one of the top tickets this year. Homebuyers, especially first-time homebuyers, are finding themselves frustrated and disappointed when they are beat out by a competitive offer. So how can buyers compete in this type of market? How can they win a bidding war? Here are six ways homeowners can get the edge up and potentially win a bidding war on a home.
#1. Communicate with the listing agent and seller.
There’s a big difference between an offer that simply gets faxed over or emailed without any prior communication and one in which the buyers agent has been talking to the listing agent on exactly what the sellers need and want. This is one of the best ways to tailor an offer for the seller. A blank offer that comes through without any notification or communication is likely to get pushed to the bottom of the pile versus one that you know is on its way and has been custom designed in favor of the seller. Now, while not every offer is going to be the best cherry picked offer for the seller, this can definitely get you ahead of the competition. Understanding when the seller wants to close, why they need to sell, and the terms they need, can really help motivate the seller to accept your offer.
#2. A higher earnest money deposit.
When sellers see that the buyers are putting more of their own money on the line, they are more likely to accept an offer. If for some reason the buyer backs out without any cause or legal excuse, that earnest money could go to the seller, which might seem pretty attractive. However, just because you decide to make a higher earnest money deposit, doesn’t mean you’ll necessarily lose it, even if you decide to back out of the deal, but to the seller, this can be very attractive.
While just about every buyer was going to have some sort of preapproval, stating that you are approved for above the asking price may actually be or attractive to sellers. Chances are every offer the seller gets is going to have some type of preapproval mortgage letter from the buyer, but tailoring it to fit this specific offer, can put you ahead of the game. As always, you want to be preapproved for a mortgage if you plan on financing the property before submitting an offer. Any offers without this preapproval letter are likely to get rejected immediately.
#4. Act quickly and timely.
Hot homes tend to sell like hotcakes so there’s no time to waste. These properties typically sell within a month so you need to act fast and be timely with your responses and anything that escrow, title, your lender, or your agent needs. Simply being responsive and communicative can work wonders on getting your offer accepted.
#5. Minimize contingencies.
If the seller sees one offer with a contingency on selling the buyers home first versus an offer that has no contingencies, regardless of the terms or the price, the seller is likely to go with the non-contingent offer. Contingent offers, meaning that the buyer needs to sell their own home before they can purchase another home, really only work in buyer’s markets. When sellers have multiple offers stacked up, they’re not likely to hang around and wait for your home to sell. While I understand that this is not always possible, there are strategies and negotiations that we can work around such as a bridge loan between selling your own home and buying another that can work in the meantime.
#6. Get personal on terms and price.
Wrapping around to the first tip I offered, getting personal either with a letter or with the seller’s terms and price can really work wonders. If you love the property, let the seller know in a quick, handwritten letter. Be open and honest. Sellers realize when you are simply blowing smoke or trying to pad the offer. Not every personal letter will work and sometimes it can backfire, but this is where good communication with the listing agent is a must. I had a seller that had just lost her husband and needed to sell the home quickly. She received seven offers in the first week and six of them came with a personal letter. She decided to go with the one that didn’t come with a personal letter because the buyers agent contacted me first to understand the current situation. They realize that a personal letter would have no effect on the outcome and to simply put in the best offer possible. It is there offer that got accepted.
A bidding war can be tumultuous but it also helps to have an experienced and seasoned agent that is well-versed in bidding wars and how to compete. When you need to buy or sell in Gilbert or Chandler Arizona contact my office at any time. Let me help negotiate on your behalf to get the right home at the right price.
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