By Kim Peele
Buyers often tell us that they don’t want to participate in a bidding war. However, in our area, if a home is in great condition and well-priced, there will always be competitive bids.
There is rarely an actual “bidding war.” Buyers simply need to make their best offer, as there is seldom an opportunity to change or improve it once the offer is submitted. Here are some tips for putting your best bid forward when you make an offer on a home.
Be prepared with a good loan pre-approval letter from a local lender, ideally one that has been highly recommended to you by your realtor. This should be done in advance of even looking at homes, so that you can move quickly when you find your home of choice. Your realtor can advise you on which lenders will assure a smooth process and which will be difficult to work with. Listing agents will counsel their sellers to accept contracts with lenders that get to closing on time. This is an important piece of your home purchasing process and, in a competitive situation, it can impact whether your offer is accepted.
There are several contingencies in a contract that you can select when making an offer. These allow you to cancel the contract and still get all of your earnest money deposit back. However, the more restrictive your contingencies are, the less attractive it is to a seller. So when you are writing the terms of your offer, keep in mind that asking for too much lessens your likelihood of winning.
While we do not recommend purchasing a home without a home inspection, there are options that can protect you and also make your offer very competitive.
Consider visiting the home with a home inspector in advance of making your offer. This allows you the option of leaving the home inspection contingency out of your offer, and it lets the seller off the hook for repairs. Another option is to choose to do a home inspection with the option to void, but not ask for repairs. This allows you to do your due diligence and cancel the contract if you are not comfortable with the repairs needed, but will not be as competitive as an offer that waives home inspection.
Another common contingency is the appraisal. If you are certain that the home is priced correctly and you have some extra funds in case the home appraises lower than the sale price, you may decide to waive the appraisal contingency. Another strategy is to write it into the contract that you will cover any shortage on the appraisal up to a maximum figure that you determine in advance would be affordable for you. This can be attractive to a seller and also provide protections for you and your finances.
If you are certain that you will have no issues getting your final loan approval, you may want to consider waiving the financing contingency. This shows the seller that you are so certain that you will get to settlement, that you are willing to risk losing your deposit. Of course, you will want to discuss this with your lender to be certain that this is a viable option for you.
It’s also important to present your offer in a way that shows that you will be easy to work with. If you already see issues that you would like remedied, it’s best not to itemize them in your offer. If they are hugely important to you, consider addressing them at a later time during the transaction, unless they are so important that you would never buy the home without these requests being accommodated.
Buying a home is definitely a time for shrewd negotiation, and nobody wants to overpay. However, in a competitive market, which we are in, the most important thing is to win. Rely on your real estate professional to help you put together an offer that’s going to win against all other offers. And remember, homes in the D.C. metro area tend to consistently appreciate. If you are keeping your new home for several years, you will not remember later that you paid a little bit more than you wanted.
Kim and Hope Peele of The Peele Group are a family real estate team where delivering a high-quality experience is their top priority. They are part of McEnearney Associates.