Preparing for a Bidding War in Today’s Market
So, how to prepare for a bidding war when making an offer on a new home?? Today’s market can be tough, especially with low inventory. In Sonoma County we have the, unfortunate, change of events impact the real estate market as well as the work force numbers. 2017 we were hit with the Tubbs fire which burned over 3,000 homes to the ground. Building of the replacement homes started immediately. However, we had another big fire come around in 2019- Kincade fire. Sonoma County was not prepared at all for the Tubbs fire, but this go around with the Kincade was a different story. We did not lose nearly as many homes or structures but we had a lot of smoke damage form Kincade. This chain of events of evacuations, Warnings and then smoke damage evaluation and Restoration of homes, really halted the real estate market. And now with the 2020 Pandemic, along with some more lighting fires, we just can’t seem to catch a break. We are competing with each other AND the Baby Boomers moving from the city.
It is very important to go into every deal ready to go to war and bid! This is, also, where it is very important you have an experienced realtor on your side. A realtor that is experienced, but liked in the community and know to “get things done.” Keep in mind that sometimes the best offer is not just in price. You may go up against many offers and “bidding war” may be a serious of items that intrigue the Seller. Your experienced agent will do the homework on the sellers- their motivation to sell, the factors that they need for a smooth close, etc.
Get Preapproved for your home loan
Know what you can afford
To get you prepared for a Bidding War, we first get you pre-approved. Let’s see where you stand in qualification. You may only want to pay a certain price, but I always recommend getting approved for the max so you know what that payment looks like. Be prepared, on the event, you do have to go up in price- It is better to know right away if that option is even a choice for you. No delays, cut to the chase. Having a good lender is helpful here as well. Many programs for buyers and many strategies to put a good offer together. These different programs may allow a higher debt to income ratio, or lender paid MI into rate, etc. Lender has a job to find you the best program/price. When we prepare for a bidding war, we come in with a lot of ammunition. A few different price points and scenarios can help you feel prepared, in the event, the Seller counters your offer. At that time it is important to answer fast, before another offer swoops in.
Make Your Best Offer
Highest offer is not always the best offer.
Now for the offer- we look at timelines for seller and for yourself. We ask questions like “does the seller need a rent back” or “does the seller need a longer escrow.” All these question can help you understand the seller and relate to their situation. Is this the home they raised their children in? Is this the home that was a rental and no emotional connection? A letter to seller tugging at the heart strings could make a difference when offering on a family home. But, it may be worthless for an investment home. So many variables, but this is why choosing the “right” agent is important. I have been known to get an offer accepted just because I was the agent and the listing agent liked working with me. I have had listing agents share that they would rather not work with another agent, as that agent has had poor dealing’s and is always canceling his buyers for lack of preapproval, etc.
All great points when tying to prepare for a bidding war. Keep in mind when there are other offers, you need to come in with your best offer. Last thing that you want to happen is offer a little less “to see” and then they take a different offer that is lower than what you were willing to pay IF a counter offer came. In a bidding war there is NO GUARANTEE that the Seller will even issue you a counter offer. Sometimes there are too many offers and sellers just pick the best. So, ALWAYS, go in with your best offer….Especially, when you know there will be more offers. Seller will not always give you a counter offer.
Pick the “right agent,” experience a must!
How To Prepare For A Bidding War