Beth Erickson Sand at LIV Sotheby's International Realty
News > Competing with Other Offers? Here's How to Win a Bidding War
published on 2022-04-23
So you found the Denver condo or townhome you must have. It's in your favorite part of town, in your price range, and in your dreams at night. The pictures are gorgeous. Time to get off the couch and put an offer in.
But then your agent wrecks your nice dreams by letting you know that there are several offers already submitted. One might be over the asking price. And you have to hurry because the seller is deciding tomorrow.
Our team is running into this situation more often in this market, unfortunately, which is kind to the sellers but quite annoying to buyers. There aren't enough condos for sale in Denver to meet demand, especially in the lower and mid level price points and in the popular areas, like Cheesman Park or Cherry Creek. But someone has to win the bidding war, so why can't it be you? If your competitive juices are flowing, then here are some ways to end up with your favorite place.
BE READYThe best way to snag your favorite place is to be ready to put in an offer when that perfect condo pops up. That means having a pre-approval letter from your lender, or proof of funds letter from your bank. Know what price you can pay without over-extending yourself, as it's easy to get caught up in a frenzied bidding war and end up with a financial obligation you'll regret.
Sellers prefer Cash offers, which often win out over finance offers. Why? Because after the inspection period, the seller doesn't have to worry about the buyer's loan getting denied. Many buyers can't pay cash for a real estate purchase, but before you dismiss the option, consider some more creative ways, like a home equity line of credit on your primary residence (best for second home buyers), a bridge loan, a family loan, or a temporary loan from your 401k (if allowed). Then after the purchase, you can re-finance if you wish. You'll need to plan ahead for some of these options though, and there is some risk involved.
REMOVE THE APPRAISAL CONTINGENCY
If you can't or won't pay cash, the next best strategy for a property that you may have to over-bid for is to drop the appraisal contingency. If you are financing the purchase, the lender requires an appraisal, and if the property doesn't appraise for the contract price, the buyer has an opportunity to cancel the contract, which is obviously a negative for the seller. Instead, you can choose to drop the appraisal contingency. However, be aware that if the property appraises for over the purchase price, you may need to contribute a larger downpayment. For example, if your $400,000 purchase price requires a 20% down payment ($80,000), your loan amount would be $320,000. If the property appraises for $397,000, the loan amount decreases to $317,600 (80% of the appraised value) and your down payment increases to $82,400.
DROP ALL EXTRAORDINARY REQUESTS
Make your offer as clean as possible in order to compete well with other offers. Though we all want the seller to professionally clean the property before closing or have them leave the killer tv in the living room, this and other requests like it will give the seller just one more reason to say no.
I have other options I discuss with my clients, including having the earnest money go hard after the inspection or using an acceleration clause. But the most important way to win the bidding war is to offer a competitive price. As I am a condo and townhome expert, I'll help you determine what that offer price should be. Contact me before you see that perfect place, so we can get prepared!
Though not guaranteed, information and statistics in this article have been acquired from sources believed to be reliable.
The Fair Housing Act prohibits discrimination in housing based on color, race, religion, national origin, sex, familial status, or disability.
Information Deemed Reliable But Not Guaranteed. The information being provided is for consumer's personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. This information, including square footage, while not guaranteed, has been acquired from sources believed to be reliable.
Last Updated: 2023-03-28 07:22:50