Across the country, and especially in Nashville area the housing market is on the rise. Now more than ever, individuals and families are taking advantage of the growing economy and snapping up homes. With so many people looking to make this type of investment, it’s not uncommon to find yourself in a bidding war. Buying a house can feel overwhelming, and at times cutthroat. When you see your dream home in your price range, the thought of having to bid against multiple offers sounds daunting, but it shouldn’t be. There are a few things you can do to set yourself apart from the competition and not all of them means you need to be the highest bidder. 1. Organize your finances
If you are up against some tight competition for a home, one of the most strategic moves you can make is to organize your finances before the real bidding begins. While the housing market is on the rise, it’s still a tight market, and you’ll want to have access to all the cash that is available to you. If you need approval for a loan, get the process rolling before house hunting. Appraisals can come in low and affect the ability to close, so be ready to cover the difference if it’s needed. The most important aspect is being aware of what is available to you and having instant access to the money when the time comes.
2. Consider an escalation clause
You want to come in hard and strong. Having access to the money is only the beginning, but you don’t want to put all of your cards on the table just yet. One way to strengthen your position in a bidding war is to have your agent include an escalation clause. This type of clause is standard and lets the seller know how much you are willing to go up in price if someone can match what you’ve put on the table. For example, if the house is listed at $300,000, your agent can place an escalation clause in your contract that states your initial bid is $300,000 but if someone can match this amount, you can go up to $1,500 over the competition’s offer. The most important aspect of the escalation clause is the limit. Your bidding increments are only applicable until you meet your cap. Say for example you set your cap at $310,000, the $1,500 raise will stop at $310,000 and if the other buyers put down more, you are out of the race. Providing a cap protects you from purchasing a house you can’t afford.
3. Limit the number of demands.
Most sellers are looking for a straightforward deal. If a buyer is placing a lot of demands, it’s very likely they might pass over your offer for someone who isn’t going to require a lot out of them. Common contingencies would include waiting for a spouse or partner’s approval or asking the seller to purchase a warranty. One of the biggest demands many buyers try to add is language about repairs. If there are issues around the home that need to be fixed, weigh up the price of repairing them yourself versus losing out on the home of your dreams. Asking the seller to pay the closing costs isn’t uncommon when purchasing a home, but if there are multiple bids on the table, they might choose someone who would wave this clause from the contract.
4. Give the seller flexibility
This tip piggybacks off the previous point about demands. When you offer the seller flexibility on the closing date, you position yourself attractively when the competition is tight. There have been instances where buyers have been outbid, but because they were willing to allow the seller to either rent back the property or push out the closing date, their bid was chosen over others.
Similarly, if the home is empty, you can offer to close quicker. Many sellers worry about theft, holding costs or other hazards of having a house vacant. If you have secured the funds and can close in less than two weeks, it’s possible you can get an edge over the other buyers regardless if you can outbid them.
5. Put it in writing
Never underestimate the value of a written letter. With stiff competition, it’s easy to get swept up in the chaos. Even the seller can get swept up in the back and forth, but many realtors will attest that a written letter can go very far. There’s a lot of distance these days regarding communication. Social media and emails have almost eliminated the need to communicate via a letter. Appeal to the seller’s heart and try to explain what owning their home would mean to you and your family. If you really want it to work, keep it sincere, and maybe include a family photo or two.
If you’re purchasing a new home, you’ll want to have the best policy. At Royce Williams Insurance, our experienced agents will help you determine the right level of homeowners insurance to protect your home and most cherished belongings. Contact us for a free home insurance quote. We can walk you through a new policy or make updates to your existing one. Contact Royce Williams Insurance today!