How to Lose a Bidding War and Still Get the House
Over the past two years, home prices have seen double-digit percentage price increases in some cities, and more modest percentage increases in others. But overall, there are more buyers vying for fewer homes in many markets across America. As that happens, it is inevitable that you are going to make a few offers on a few homes that won't win the deal -- but don't dismay. Now, you may be able to turn that next rejection into your dream home! Here are eight reasons why you may be able to change that "Sorry, you didn't get the house" to a "welcome home!
A Backup Offer Is a Secret Weapon -- So, you lost the house to someone else, and you may never know why. Maybe they offered more money, or their terms were slightly better than yours. However, you can ask the seller to accept your offer as a backup offer, even if it was slightly less than the accepted offer. It costs you nothing! You don't have to put out any money, yet you are in line to get the property if the current buyer falls out.
Sellers Love the Heat of Backup Offers -- Sellers love backup offers because it puts pressure on the original accepted offer to close the deal quickly, knowing that there is another buyer standing in the wings, hoping to take center stage.
It's All So Close, They Can Taste It -- Once a seller has a deal on the table and it is progress, they are already psychologically starting to move out. They are picturing the closing day, handing over the keys and seeing the moving trucks arrive. If something goes wrong, and the deal abruptly comes to a screeching halt, the seller is now in a frustrating position and much more willing to move forward with a backup offer that is already in place, even if it is a little less than the first offer, just to keep that momentum going.
Chances Increase After the Inspection -- I have won big in backup situations where there has already been an inspection and the house falls out because there are problems that the buyer doesn't want to deal with, can't handle, or the seller won't credit or fix. But, in reality, the good news for you is those issues won't go away. The buyer may realize he can't pay so hardball, and may now be more willing to work something out with you, rather than lose the deal a second time.
We're in an Era of Tougher Loan Qualifications -- As loan qualifications become tighter and more scrutinized, more homebuyers are finding they can't get their loan approved, and they may have to back out of the deal. In this situation, you have the advantage of jumping in to 'save the day.'
Set a 30-Day Time Limit -- Make your backup offer expire after 30 days. The longer it takes to complete the current transaction, the greater the chance the two parties are struggling to work through their differences. A time limit will force the hand of your competition, which may make them unable to close the deal.
Get First Right of Refusal -- Ask for this clause in your backup offer. You're not bound to take the property, but once they've accepted your backup offer, they are bound to ask you first.
Get the Terms of the Backup in Writing -- Lock those sellers into you. Once the seller agrees to accept your offer as backup, make sure to get a fully executed agreement, signed by both of you, that clearly outlines price and terms. Make sure that they are obligated to sell to you within a certain period of time at the agreed-upon terms if the property becomes available.
Extra Bonus for the Backup Buyer:Legally, the sellers have to disclose any problems the first-position buyers uncovered, even ones that made them bolt! As a result, you will know the property's recently uncovered flaws ahead of time. It saves you time and lets you know about some of the red flags, even before you start to spend the time and money on your own inspections.