How to Win the Bidding War
If there’s anything worse than trying to purchase a home during a tight seller’s market, it’s finally placing an offer on your dream home — only to have the Realtor come back with those dreaded words, “The seller has other offers.”
The best way to prepare yourself for a situation like this is to be proactive and look at things from the seller’s point of view. Above all else, they want to get the best offer possible. But more cash isn’t everything. Sometimes what the seller values most is a buyer who appreciates them and is willing to facilitate a hassle-free sale with optimum flexibility. That buyer could be you.
Have a Preapproval Letter
Experienced Realtors in tight markets strongly recommend that buyers have a letter from the lender stating that they are preapproved for a loan, pending all but the home appraisal. This document gives sellers reassurance that the loan is not going to fall through during the negotiation stage, sending them back to square one.
In a down market, you can ask the seller to pay for items flagged in the pre-inspection report. The seller may be so happy to receive an offer that she’d rather lose some money on the deal than face having the property linger for months on the market.
In a bidding war, however, you have to ask yourself which is going to have the biggest impact — offering more money, being willing to wave negotiation over repairs, or some combination of the two. Some sellers just want to get out of dodge and will favor the buyer who attaches the fewest contingencies to an offer.
It may also help to include an escalation clause in the contract. This addendum states that you are willing to increase the bid by small increments automatically up to a certain point. The escalation clause can help to reduce stress during the negotiation process and safeguards against overbidding. It can also show the seller that you are serious about purchasing their property.
Woo the Seller
You’ll do much better in a seller’s market if you can remember one simple fact: people love their houses. They love the changes they made to the interior and the time they spent landscaping the yard. After all, they put down roots here, and the home reflects a significant emotional investment.
One way to sway the seller is to appeal directly to this pride of ownership by sending a “love letter” explaining why you want to purchase their property. Mention how much you’re going to love making holiday dinners in the kitchen or which bedroom will be perfect for your child-to-be — and don’t forget to portray yourself as a responsible person with the resources to care for the home over time.
While writing the seller personally is no substitute for a huge bid, establishing a personal connection can definitely give you the advantage when the margin is small.
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