By: Ryan C. Benton
Summer’s here, the COVID-19 lockdowns in Virginia are phasing out, and the real estate market is hot. In fact, a recent study from the National Association of Realtors shows that nearly 42 percent of buyers who purchased a home between January and May were in a multiple-offer situation.
And throughout several popular neighborhoods and price points here in Hampton Roads, the trend extends here locally. While there’s no science behind winning a bidding war on a house, there are things that you can do to up your chances in a market where we are seeing multiple offers. Here are several:
Open with a bang
The desire to buy what we want for as little money as possible is deeply ingrained in us. So, when most people see the listing price of a home, they naturally wonder what they can really get the house for. But trying to get a deal when you’re in a seller’s market might not be the best tactic.
Make a solid opening offer by doing your research or talking to a knowledgeable REALTOR about whether the seller has priced their home fairly for the market. Remember, if the seller has multiple offers in hand, they might not give you a second opportunity to change your offer.
Pre-approved buyers are preferred buyers
You might know that you’ll be approved for a mortgage loan based on your steady income, your low debt-to-income ratio and your high credit score, but the seller probably doesn’t know that. The only way to prove to the seller you’re a qualified buyer is to be prequalified from a mortgage lender.
It’s quite surprising to learn how many people start bidding on real estate without finding out if they can actually get a loan. Sellers love to have pre-approved buyers bid on their property and are much more likely to quickly accept your offer.
Cash is king
Competition from buyers who make all-cash offers is also driving up prices. If you can pay for a home with cash, any reasonable offer you make to the seller will probably be accepted.
Although paying with cash is the best way to avoid a bidding war in “hot” areas, it’s understandable that most buyers won’t be able to do this.
Insert an escalation clause in your offer
Escalation clauses are useful when bidding wars threaten the ability to buy your dream home. An escalation clause is an attachment to your offer stating that you will commit to raising your offer if another buyer places a bid higher than your bid. In most cases, this amount is specified in increments.
For example, if you place an offer of $330,000 on a home and someone else bids $331,000, your escalation clause may assert you will bid up to $2000 more than another person’s offer. This means your bid automatically goes to $332,000. Consult with your Realtor before deciding on whether you want an escalation clause included in your offer.
Get personal
This is a business transaction., and the bottom line will pretty much always be the final deciding factor. However, it never hurts to humanize your offer with a personal appeal. If you really love a property, let the seller know in a letter.
Be open and honest regarding why you feel so strongly about their home and why you think you’re the right buyer for it. Don’t be afraid to get a little emotional. Maybe even include a family photo. This strategy will not work every time, but with a seller who themselves feels a strong connection to the property it will make a positive impact.
Tips for sellers who want to avoid a bidding war
• Don’t automatically accept the highest offer. It can be easy to want to go for the highest offer right away, but the strongest offer is not necessarily determined by price. Price is important, but terms are important as well.
• Don’t get too greedy. If you get bids over your asking price you may be tempted to counter-offer for even more. But remember that the goal is to sell the house, not to fight for the highest price when you are already getting over asking price for the property.
• Have a plan. Know ahead of time exactly how much you are willing to concede in terms of price for your property. Stick to that concession and don’t hesitate to take a decent offer from a pre-approved homebuyer.
Buying or selling a home always takes a bit of strategy and a bit of luck. And no matter how crazy the market is, your Realtor will be able to help guide you through each step of the process so that you know you’re making the right decisions at the right times. Like I always tell my clients: Be confident, be calm and trust that if it’s meant to happen, it will.
Ryan C. Benton is a Realtor with Rose & Womble Realty in Chesapeake and a member of the Hampton Roads Realtors Association. He was recognized as one of Inside Business’ “Top 40 Under 40” honorees. For more on HRRA, go to www.hrra.com. Contact Benton at 757-544-0383 or rbenton@roseandwomble.com, or visit TheHometownAdvantage.com.
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Pre-approved buyers are preferred buyers
You might know that you’ll be approved for a mortgage loan based on your steady income, your low debt-to-income ratio and your high credit score, but the seller probably doesn’t know that. The only way to prove to the seller you’re a qualified buyer is to be prequalified from a mortgage lender.
It’s quite surprising to learn how many people start bidding on real estate without finding out if they can actually get a loan. Sellers love to have pre-approved buyers bid on their property and are much more likely to quickly accept your offer.
Cash is king
00:0202:53
Competition from buyers who make all-cash offers is also driving up prices. If you can pay for a home with cash, any reasonable offer you make to the seller will probably be accepted.
Although paying with cash is the best way to avoid a bidding war in “hot” areas, it’s understandable that most buyers won’t be able to do this.
Insert an escalation clause in your offer
Escalation clauses are useful when bidding wars threaten the ability to buy your dream home. An escalation clause is an attachment to your offer stating that you will commit to raising your offer if another buyer places a bid higher than your bid. In most cases, this amount is specified in increments.
For example, if you place an offer of $330,000 on a home and someone else bids $331,000, your escalation clause may assert you will bid up to $2000 more than another person’s offer. This means your bid automatically goes to $332,000. Consult with your Realtor before deciding on whether you want an escalation clause included in your offer.
Get personal
This is a business transaction., and the bottom line will pretty much always be the final deciding factor. However, it never hurts to humanize your offer with a personal appeal. If you really love a property, let the seller know in a letter.
Be open and honest regarding why you feel so strongly about their home and why you think you’re the right buyer for it. Don’t be afraid to get a little emotional. Maybe even include a family photo. This strategy will not work every time, but with a seller who themselves feels a strong connection to the property it will make a positive impact.
Tips for sellers who want to avoid a bidding war
• Don’t automatically accept the highest offer. It can be easy to want to go for the highest offer right away, but the strongest offer is not necessarily determined by price. Price is important, but terms are important as well.
• Don’t get too greedy. If you get bids over your asking price you may be tempted to counter-offer for even more. But remember that the goal is to sell the house, not to fight for the highest price when you are already getting over asking price for the property.
• Have a plan. Know ahead of time exactly how much you are willing to concede in terms of price for your property. Stick to that concession and don’t hesitate to take a decent offer from a pre-approved homebuyer.
Buying or selling a home always takes a bit of strategy and a bit of luck. And no matter how crazy the market is, your Realtor will be able to help guide you through each step of the process so that you know you’re making the right decisions at the right times. Like I always tell my clients: Be confident, be calm and trust that if it’s meant to happen, it will.
Ryan C. Benton is a Realtor with Rose & Womble Realty in Chesapeake and a member of the Hampton Roads Realtors Association. He was recognized as one of Inside Business’ “Top 40 Under 40” honorees. For more on HRRA, go to www.hrra.com. Contact Benton at 757-544-0383 or rbenton@roseandwomble.com, or visit TheHometownAdvantage.com.