How to WIN in a Bidding WAR
Buying a home in 2021 is really tough! Here are 3 things you need to be prepared for if you’re heading into a bidding war!
Buyers in 2021 are having a very difficult time winning the bidding wars that are occurring on almost every home that hits the market right now. The 3 things that can help you with winning the bid are having a strong price and escalation, removing appraisal, and removing inspection contingencies.
Pricing and Escalation
Before I go in detail about these items, I want you to know that you should only do what you’re comfortable with and capable of doing. These are merely suggestions taken from real situations of winning bids that our team has been seeing every week in 2021.
The First item is to start with a strong price and then escalate as needed or desired. Home prices have gone up since the Fall of 2020 so hopefully there will be some comparable sales that you can review from 2021, but if not, you may need to look at sales from the second half of 2020. After reviewing the comparables and remembering that prices have increased recently, decide what amount you will start your offer at. Some buyers wish to start at list price, however, we are seeing more and more offers BEGIN way over list price. Once you decide on your initial offer, you may want to escalate to an even higher price. This would mean that you are willing to go up to a certain number to beat other offers that come in over your initial price.
Removing the Appraisal
The second is removing the appraisal rider from the contract. Once you have decided on price, you may have a concern that the home will not appraise for the price you are escalating too. Some buyers are choosing to remove the appraisal which means you would agree to pay the difference if the appraisal comes in short of the purchase price. Another option is to agree to pay for a certain amount over the appraisal price without totally agreeing to pay ANY amount over. As an example, a buyer may say they will pay UP TO $10,000 over the appraised value instead of just agreeing to pay ANY amount over.
Removing Inspection Contingencies
Finally, many buyers are removing their ability to ask seller to repair or replace any items after the inspection takes place, AND some buyers are even removing inspections altogether!!! This should definitely be seriously discussed and decided upon by buyers! If buyers decide to have inspections, buyers can still have the option to walk away if the inspections do not go well.
There are many variations on the three items we’ve discussed today and our team can certainly go into more details about this during the process and when it’s time to write an offer. In the end, the buyer must decide what they are comfortable with and do what’s best for them and their situation.
Our team has other strategies we use for our buyers to win the bid and have helped 19 buyers to go under contract on properties in just the first 2 months of 2021. We wish the best to all of the buyers out there! It is a crazy time and we are here to help!