With a lot less inventory on the market recently, most home buyers are finding they need to compete in a bidding war with other potential buyers for their perfect home. When you have never been through the process before, it can be rather daunting. There are a few basics of going through a bidding war that every first-time buyer should know; here are just a few examples.
There is a very real advantage of getting pre-approved for a mortgage before engaging in a bidding war. It gives you the knowledge of the maximum financing you will receive from your financial institution. This means you will then know how high you are able to bid. It also means you won't just go for the first house you see; you will shop around and pick the house not only that you love, but that you can safely afford.
Be Aware of the Market
A lot of people rely on their real estate agent to be aware of the average selling prices in the area they wish to buy in. It is actually a good idea to be aware of these numbers yourself. Take the time to research the market in the area you wish to buy a home to see what the fair market value for the home you're bidding on is and what comparable homes are selling for.
Don't Add Clauses
If you really want to win a bidding war, then don't add any clauses to your bid. For example, many buyers must sell their own home first before they can buy another one, so they place this condition on their bid. If you can, place your bid without any conditions, such as requiring all repairs to be completed before you buy (only do this if you are handy or have the funds to do repairs and always have a home inspection). If you bid without any conditions, you may be more likely to win that bid over one that has conditions.
Bid Slightly Higher
You might think it's a good idea to simply bid at the asking price, as many buyers will come in under it. Instead, bid at a slightly higher amount so the sellers know you have the funds needed to purchase the house and are serious about buying it. It also makes you more attractive because your bid will be higher than many bids they will receive. It is possible that others will counter with a higher bid, and the seller will send a counteroffer to them, so be prepared to either go a little higher or bow out if it exceeds your budget.