How to Win a Bidding War Even If You Don’t Have Cash
We have a very low...even historically low…amount of homes on the market right now.
Much like a forest fire that feeds and grows bigger, fueled on it’s back-draft, the fact that there IS limited homes available actually keeps more homes from coming on the market.
If you’re one of those homeowners who have been toying with the idea of selling, you probably already realize this is one of the best times ever to sell…
But you wonder if you’ll be able to find a place to move to…
And if you find the perfect house, will you end up in a cash-depleting bidding war just for a chance at the house you want…
Or worse yet, if you get beat out, will you end up homeless?
You have obviously been paying attention! You are in tune with today’s market and ready to prepare for this possibility.
Some homes are getting five or more offers within hours of hitting the market, yet only one wannabe home owner is going to win…and the winner may not even have had the highest offer.
Instead, he probably offered the seller the least risk.
A low-risk sale, generally a cash offer, is the quickest route from offer acceptance to closing.
But what if you’re not a cash buyer?
Do you even have a chance?
Yes! You can still mimic the cash offer by taking on the risk of financing yourself and getting all of your ducks lined up and in their proverbial row.
There are three main risk to financing…and we’ll take a closer look at each one
And how to kick their associated risk to the curb.
The Financing Contingency
Approval: No more than ___ days after acceptance of this Agreement shall be allowed for obtaining loan approval or mortgage assumption approval. If an approval is not obtained within the time specified above, this Agreement may terminate unless an extension of time for this purpose is mutually agreed to in writing.
The risk to the seller: Despite getting a pre-approval, where the lender reviews your credit and ask for your financial information, getting a full-on, underwriter-blessed loan approved can sometimes take on a life of it’s own.
Unreasonable lender demands can add weeks to the closing process and there’s little anyone can do except try to get the cantankerous lender everything they need…as quickly as possible.
How you can remove this risk: Take the time to get a fully underwritten approval before you write an offer. Then make sure the seller KNOWS you are fully approved and can go straight to closing after the appraisal.
The Appraisal Contingency
If Buyer obtains an appraisal of the Property, this Agreement is contingent upon the Property appraising at no less than the agreed upon purchase price. If appraised value is less than the agreed upon purchase price,
either party may terminate this Agreement or parties may mutually agree to amend the price.
The risk to the seller: Just because you’re willing to pay over the listing price for the home of your dreams, the appraisal may not be able to support that price. This puts the sale at risk for falling thru…any seller’s worst nightmare
How you can remove this risk: Write into your offer that you are willing to pay the difference between the offer price and the appraisal price if appraisal comes in lower.
Seem like a scary move? A good agent will be able to support a price point for you by providing recent sales in the area that are comparable to your current house-crush.
And remember…you’re not after a deal, you’re want to be the winning bidder.
The Offer Price
Cash buyers do not ask the seller to pay their closing costs. They also know that paying cash has a lot of advantages for the seller and their offer may not be the highest.
The risk to the seller: Taking the risk-inducing appraisal and financing contingencies off the table can temp the seller into accepting an offer lower than other qualified offers.
How you can remove this risk: As you are able, write the offer over the list price with no out-of-proceeds funds paid towards your closing costs.
Being Prepared To Win!
By getting a full approval, removing the appraisal risk and making a strong, over-list offer price while asking for no assistance with closing cost, you will have effectively leveled the playing field with any cash buyers.
Your offer will now compete neck-in-neck with those cash offers and have an increased chance of coming out the winner!
Have you tried anything else that’s helped you get an offer accepted? Let me know in the comments and we’ll throw it in the ring.