Before you even make a bid on a home, educate yourself on the selling prices of other homes in the area. If you’re using a real estate agent, he or she can provide you with all the information you need on comps for a particular neighborhood. If you’re buying directly from a builder that has developed a community, the builder’s agent can provide you the latest selling prices of the homes. If multiple offers do come in, you’ll be educated about how much is too much. Bottom line: You don’t want to overpay.
It’s easy to forget what you really want to pay for a house when you get swept up in a bidding drama. Always put in a bid for what you think the house is worth based on the comps—or what you’re willing to pay—and stop there. If you do lose a bid, be mindful of your next offer. Why? Homebuyers who lose bids are inclined to overspend on their next offer, because they don’t want to go through the emotionally draining experience again. Our advice? Calm down. There’s always another house.
Bidding wars often take place in “hot” neighborhoods. If you must live in a sought- after neighborhood, know a bidding war is probably in your future. If this scenario isn’t up your alley, remind yourself that there are lots of other neighborhoods that won’t create this kind of competition. And, what’s more, those other neighborhoods will probably have some lovely homes.
One last thought: If you’ve decided to make bids on homes in a popular area, don’t add lots of trivial contingencies. Things like, “Can you switch the color of the front door?” or a protracted closing date could sway the seller to a competing bidder.
Before you start house hunting, make sure you’re pre- approved for a mortgage. Not only will a pre-approval letter from a lender help you understand what you can afford; but sellers also pay more attention to buyers who are pre-qualified. Sellers will know you can afford to buy their home and won’t waste their time. Even if your bid is lower than another buyer’s, your pre-approval letter might swing the deal in your favor.
Unfortunately, there are sellers and real estate agents who list homes at low prices just to generate a bidding war. Unethical? Some people think so. But, it happens all the time. If a home is listed at a price that seems too good to be true, it probably is. Again, you don’t want to get swept up in seller-generated bidding drama—you want to be aware of what’s really going on.
If you do choose to bid in a popular neighborhood, make the best offer you can afford, but know it’s probably going to be more than the asking price. Show the seller you’re committed to buying the home by making a substantial deposit. And if you can meet the owner in person, go for it! Anything helps in a competitive situation.
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