March 17, 2014 at 9:31 AM
Despite a tough winter, the Summit area real estate market remains strong as the Spring selling season heats up. Inventory levels in the Summit market remain near record lows, and those looking to purchase are already facing multiple bid situations, some competing against up to 10 other potential buyers.
This results in an extremely stressful buying experience, as the transaction moves at a rapid pace. Buyers may lack the time to make well thought-out decisions and, in some cases, it might cause purchasers to over pay for a home, resulting in buyer’s remorse.
Here are some effective tips to help buyers present a strong offer in a bidding war environment:
Experience is Everything
The dynamics of real estate require that buyers be prudent, educated, rational, and strategic in difficult market environments. This is not an easy task, and it is essential to enlist the expertise of a savvy real estate agent. An experienced agent will have encountered these multiple-bid transactions, and will help you present a strong offer with desirable terms while, at the same time, being knowledgeable about the local market, thus preventing you from overpaying for the home.
Cash is King
All cash offers tend to be one of the most effective strategies as it eliminates the risk of the buyer failing to get a mortgage due to weak personal financials or a low appraisal on the house. The more cash you put down the stronger the offer is considered.
Mitigate the Maybes
Once under contract, a buyer can still walk away from the deal if either of two conditions, or contingencies, are not satisfied. One is that the bank does not approve the mortgage, and the second is if the home inspection uncovers a serious defect with the home.
These contingencies are a significant concern to the seller. Waiving the financing contingency guarantees to the seller that you will come through with the money if your lender doesn’t. A waived inspection contingency makes your offer more attractive by letting the seller know you’re not going to back out or try to negotiate for home repairs. Note however, that waiving these contingencies presents substantially more risk for the buyer, so it’s important to talk with your agent about whether this strategy makes sense for you.
Make a Personal Connection
Prepare a personal letter to the seller describing who you are, and why you love the home so much. The goal is to strike a chord with the seller in an effort to get them to connect with you on a personal level. A few years back, the seller of a home in Summit asked for a personal bio from each of his bidders. He reviewed each offer and selected the offer with a lower price because one of the buyers shared his passion for sailing. It is an effective strategy and simple to execute.
Commitment In Hand
Ask your lender if they will make an exception and issue a mortgage commitment prior to finding your desired property. The mortgage commitment letter is one of the final steps in the process of closing on a home loan as it often requires an appraisal to be conducted on the property before issuing the commitment. It is possible that a lender may make an exception. In some cases, you may be able to get a conditional commitment which states that your loan is guaranteed providing the property appraisal comes back at a specific value. Sellers are more comfortable knowing that a lender is committed to lending to you based on your financials and credit history prior to going under contract.