Deerwood Realty and Friends Podcast
Saw an article on Realtor.com related to bidding wars and what you should pay attention to as a buyer…let’s see if I agree.
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Thoughts/questions:
1. Bidding every last penny you have…that is a mistake…I agree with that…what happens when the house doesn’t appraise? You will need cash for the appraisal gap and you won’t have it
2. Bidding with many contingencies… I also agree this is a mistake. Why would you bother to have a bunch of contingencies in an offer when you know you are in competition with other buyers? Makes no sense.
3. Bidding with no contingencies… So I agree with this…to a point…if someone else bids more than you .. even the same price…and they have less contingencies than you..you’re probably going to lose.
4. Assuming you’ll get a second chance….so that would be a bad mistake in this market.
5. Using the term “best and final offer” … This didn’t even work before the housing market was on fire, why would anyone think it would work now?
6. Using an escalation clause…couldn’t disagree more with this…and maybe this is regional. We see many escalation clauses here. This weekend, I had one house with an escalation clause and another house where the seller said no escalation clause. I feel like everyone has the best chance with an escalation clause of getting a home. In a strong market such as this, I am uncomfortable writing blank offers because I could be the only one offering above asking and who knows by how much?
7. Not knowing a home’s true value..In this market, it’s so hard to find a “true value”. In theory, isn’t the true value what someone agrees to pay at an arms length transaction? Then, why is it that appraisals don’t come in at that price? Makes you wonder. I advise my buyers to pick a number where if they got the house they could still sleep at night. Way better plan than Winning a war but ultimately losing in the end because your finances can’t take it.
BONUS Tips
#8. Bidding with no idea of affordability Some buyers will easily qualify at an asking price but they have no idea just how badly they might be effected by things like fluctuations in mortgage rates between when they are pre-approved and when they actually write an offer to purchase a house. You need to know your limit before you submit an offer.
#9. Making a high bid on a home to “win” the war but not really feeling the house ….Some people are competitive. Some people hate to lose. When these types of people try to buy houses, it’s usually not a great plan. Why? They lose sight of the fact that they really don’t like the house all that much but they want to win the battle anyway. This can lead to a terrible case of buyers remorse. When you are making an offer…be sure that this is actually the house you want….and that you can always put an offer in on another house. Winning just to win is a terrible strategy when looking to buy a house.
#10. Entering a bidding war on a house that you’ve never physically seen … I get it..Every weekend I see some agent at an open house with their Iphone showing a buyer across the country a house. And look, I know that the agent is doing the best they can, and I understand that the buyer may not be able to be in town, but, especially in this market…making offers on homes with escalation clauses and offers above asking without ever physically seeing the home in person is a disaster. Don’t do it. I know, people say the technology is here and that you’ll be fine. There’s just something about going to a house in person though. You get a sense of the neighborhood…you get the sense of the commute…this just can’t be replicated by an iphone…
Sources: https://www.realtor.com/advice/buy/bidding-war-mistakes-homebuyers-are-making-today/
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