How to Win a Competitive Bid for Your Next House
With housing prices continuing to increase due to a low housing inventory, the market is proving to be competitive as buyers attempt to secure their dream home. According to Don Frommeyer, CRMS, President of NAMB (The Association of Mortgage Professionals), there are several techniques potential buyers can utilize to make sure their offer sticks in the midst of a bidding war.
“Many people think the real estate market is easy for buyers, but in reality it’s still quite vigorous and with fewer houses on the market buyers must set themselves apart with competitive bids,” says Frommeyer.
Below are the techniques Frommeyer suggests considering to maintain a competitive bid:
Escalation Clauses: An escalation clause offers $1,000 above the highest bid and automatically kicks in when other offers are present. Buyers can set a cap on their escalation clause to ensure their bid doesn’t unknowingly go above what they’re comfortable with. This technique allows the seller to know the bid is serious, while also offering buyer protection by safeguarding a realistic offer from the potential buyer instead of a random counteroffer.
Cash Offers: CoreLogic reported that all-cash offers have grown to almost 40 percent nationwide. Having a cash offer with proof of the funds is extremely valuable in a competitive housing market as it typically involves fewer obstacles making it more likely to close. However, all-cash offers do not mean no financing is required – buyers may be using alternate forms of financing that count as cash by leveraging assets.
Quick Closing: Have all financials in place before placing an offer. A pre-approved loan and regular contact with a lender can show the buyer how serious the bidder is.