Buyers Beware Of Bidding Wars
With a continuing surge in housing demand across the country, home buyers are repeatedly ending up in bidding wars over the limited inventory available. Factor in record-low interest rates and more and more home shoppers are finding a line of other buyers, homes getting 30 or 40 offers, and then going for thousands above list price. Subsequently, some buyers have gotten creative in their efforts to entice sellers to choose their offer—and some are taking it too far, according to real estate professionals.
One couple told the Wall Street Journal that they had toured 50 Los Angeles homes, submitted 16 offers—sometimes above the asking price—and were outbid every single time. They were determined not to lose out on a three-bedroom home and took note of Harry Potter memorabilia all around the house. They then produced a Harry Potter-themed video for the sellers admiring the home and showing the couple reading Harry Potter books to their children. The buyers also offered to buy the sellers VIP passes to The Wizarding World of Harry Potter at Universal Studios Hollywood.
Nevertheless, despite all the work, the couple still lost out to a higher offer for the home. Real estate experts say that these types of incentives often only work to settle a tie in a bidding war, but if there’s a higher offer, that usually always wins out in the end.
Realtors are instructing clients to be particularly aggressive when making an offer and not cowed. When it comes to navigating a client through a bidding war, education and experience is vital. Prospective buyers need to be prepared with as much data as possible about the market they’re targeting.
While there is no exact formula to make sure your offer is accepted, professionals suggest a few tips to give you a fighting chance.
- Get preapproved for a mortgage. Having mortgage preapproval in hand at the time of your offer signals to the seller that your bid is a reliable one.
- Move fast. Desirable properties sell immediately so it’s important to make an offer quickly when you find a worthy home.
- Make an aggressive offer. Do not attempt to “nickel and dime” the sellers and do not make the offer contingent on anything. Recognize that you may have to bid above the asking price. Some agents are including “escalation clauses” that match or beat competing offers.
The current real estate market has sellers securely in the driver’s seat. Real estate agent referral firm HomeLight showed that fifteen percent of real estate professionals surveyed said they were worried that bidding wars in 2021 will lead to more offers on homes above their appraised values.
This can lead to more problems for the buyer. When the appraised value is lower than the offer price, a buyer could ask to renegotiate the sales price with the seller, but in this market, that’s likely to derail the purchase. If you have the means, you can pay enough cash toward the purchase to bridge the gap between the offer price and the appraised price. Before paying more than the house’s value, however, be sure that you intend to live in it for a while. You are going into the transaction knowing that you paid above market value and you are taking a risk that could easily lead to an underwater mortgage.
This is another reason why it’s important to lean on your Realtor’s expertise and advice when writing and offer and choosing how to manage a multiple offer situation. Real estate professionals have the experience and skills necessary to help you in a bidding war. They also have market knowledge, which is crucial in determining the fair market value of the home you’re interested in.
The team at Platinum Group Realtors will approach each deal with a cool head and ensure that all decisions made are in your best interest. During demanding times like these, a trusted real estate professional can help ensure your experience is as successful as possible. The Platinum Group, Realtors have worked for years at growing and refining their knowledge, and are ready to share their expertise, knowledge on market conditions, and skilled negotiation techniques.
For a no-obligation consultation, call today: (719) 536-4478 or visit PlatinumHomesSales.com.