Common Mistakes In Bidding Wars
Bidding wars are the new normal for buying a home today. In desirable areas like McCall, there may be multiple offers which might force you to up the ante in a dizzying quest to come out on top. Yet in the heat of the moment, many buyers run the risk of becoming overzealous, making mistakes that cost them the deal or worse, land them with a house they regret. Don’t be one of them.
Common Mistakes You Want To Avoid:
1. Bidding Every Last Penny You Have:
In the current market, we see many homes going for well over the listing price. It might seem like a good idea at the time to bid your full budget, but this usually is not a good idea. Why? If the home you purchase with your last dollar needs expensive repairs (think new roof, updated plumbing, etc.), you may have zero money to cover these major and necessary repairs.
If you’re getting a mortgage to purchase the property, the appraisal could come in below the purchase price. The consequence is needing a much higher down payment to make up the difference.
Best to have a budget and stick to it. There will always be other homes to buy, even in a hot market.
2. Bidding With Many Contingencies:
If you want to be competitive in a hot housing market, you won’t want your offer to be contingent upon your current home selling or any other property . Before you make any offers, have all your financing in place and be pre-approved by a lender before you bid on a house or get in a bidding war. Best yet, be an all-cash buyer. The Seller will most likely choose that type of buyer first because it means a quick and easy closing.
3. Bidding With No Contingencies:
Although this may seem like a contradiction, don’t let the “perfect home” cloud your judgement. You don’t want to put yourself in the position of bidding without contingencies, which means forgoing an inspection. You want to be able to back out of the deal if the inspector finds major problems with the home that may not be visible to you. However, you can limit what you expect a Seller to repair in the offer, with statements like “only code and health items to be repaired”.
You can compromise on many things including length of escrow, large down payment and waiving the right to cancel an agreement if the appraisal comes in under the offer amount. Your real estate agent will be your best guide for this.
4. Not Knowing A Home’s True Value:
Some Buyers will price their home slightly lower to induce a bidding war. In the current hot market, you will want to know the true value of the home you are bidding on. This means knowing the current market trends such as inventory, or lack of, the amount of time homes are on the market, and how much sales prices have increased in the area recently. Your real estate agent can provide all of this information for you before you make any offers.
Bottom line, do your homework!