In a fast-paced housing market, having a successful bid can seem impossible. With so many buyers, and so few options available, houses rarely last a week on the market. It’s not uncommon, in some areas at certain times, for houses to stay on the market for less than 48 hours. To make things even more frustrating, some houses sell for more than the asking price.
This rapid sales pattern can frustrate hopeful homebuyers, but there are ways to increase your chances of a successful bid. Instead of repeating the process over and over again (and likely seeing the same results), use these two simple tactics and you’ll increase your chances of a winning bid.
How do we know these strategies are successful?
Besides personal experience in the real estate and mortgage market (of which we have a lot!), there is also data from some of the most respected institutions in the industry. Redfin tracks real estate information and data points, including the winning strategies for real-estate bidding wars. Their data identifies three useful strategies, strategies that we have seen work.
With the right strategy, a bit of patience, and a little resilience, you’ll be able to purchase a top-quality home at the right price, in the right neighborhood, with the right financing to fit your budget.
Two Realistic Ways to Increase Your Chances of a Successful Bid
The 100%-Down Strategy: Is it Really Realistic?
Before diving into the “realistic” tips, we’d like to address a strategy that is cited by many, including Redfin, as a way to have a successful bid on a house: the 100%-down bid. Redfin’s data shows that offering an all-cash offer (basically paying for the house out of pocket and not using a loan) will increase your chances of a successful bid by 206%. This is far and away the most successful bid strategy, far outpacing the other options. (The second-best option only increases the chances of success by 59%; a major boost, but small compared to the champion.)
According to Redfin, this is the best way to have a successful bid, and we have no reason to doubt their claims. The only thing that is doubted (and the good folks at Redfin would probably agree), is whether most buyers can actually offer an all-cash bid.
When purchasing real estate, you are looking at hundreds of thousands of dollars, often millions in a single purchase. It’s simply not realistic to expect people to be able to make this kind of offer in a bidding war. Even high-net-worth individuals may not want to use this strategy, as it could deplete their savings and leave them with little financial wiggle room.
The all-cash bid is simply not a viable option for most buyers.
But, fortunately, there are realistic strategies that you can use.
Real estate has a reputation, arguably exaggerated, as being all about the numbers. Specifically, being all about the number of dollars. There’s no room for soft-hearted emotions and flowery sentiment in this industry…right?
Not exactly. Just look at the second-most successful strategy for winning a bidding war: writing a letter to the seller.
A personal letter, explaining why you want to buy the house, who will live there, and what you have in store for the future, can actually move sellers to accept your offer. In fact, this tactic can increase your chances of winning the home by 59%! It may seem small compared to the 206% increase from an all-cash offer, but it does make a difference.
What should be in your letter? The most important item should be your goals for the future, and how this house plays into those goals. It might seem sappy, but telling sellers about your children, and how they will be raised in this wonderful home, can really influence their decision. Simply put, tell them why you want the home and don’t be afraid to pour out your dreams.
But beware; there are some things to leave off. One item you’ll want to conveniently skip is your remodeling plans. People are protective of their homes, even when selling, and they may be insulted if you describe how you will gut the kitchen, redo the backyard, and chop down their favorite tree. When you own the home, it will be your right to do so, but leave these changes off the letter.
Waiving the Contingencies
The other successful strategy is to waive the contingency fee. This can be risky, but it can also increase your chances of a successful bid by 20%.
Offers to buy a house often come with contingencies, which are basically responsibilities that the seller needs to fulfill before the buyer will purchase the home. With a contingency, you are basically saying to the seller “I will purchase the home if…” This “if,” however, can represent a wide range of different aspects. There may be repairs or updates that need to be completed, but they can also include the home passing inspections or even the sale of your current property.
By waiving the contingency, you are saying you will purchase the property regardless of inspections, repairs, and other steps that are often taken during a sale.
This can put you at risk, however. When you waive the contingency, you are not going through typical inspections, which can help you avoid purchasing a home that needs major repairs. It is not a popular option, especially in markets where there is plenty of inventory and the buyer has an advantage. However, if you are frustrated by constantly losing bids, perhaps this strategy could be right.
Dedicated Service for Your Next Mortgage
If you want to find the perfect financing for your next home purchase, contact the team at San Diego Purchase Loans today. With years of experience in the mortgage industry, we can take a common-sense approach to underwriting, increasing your chances of loan approval!
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