Top 10 Tips to Win the Bidding War
1. Cash is King. Investors have been snapping up homes to flip or rent, and they usually come to the table with cash. Sellers love all-cash offers because they're less likely to fall through before the sale closes. However for the average homebuyer - all cash is not possible.
2. Start 4 months ahead. If you can't pay cash, you'll need to get a mortgage. Three or four months before you shop for a home, check your credit reports, That will give you time to dispute any errors and take short-term steps, such as paying off debts. That will improve your credit score and get you mortgage ready.
3. Get pre-approved. Then get a bank's preapproval. It will show sellers that a lender has verified your income and credit score and determined that you can afford payments on a mortgage for a certain amount.
4. 20% down payment. Any less than that is going to put you out of the running against all cash offers for sure. At least with 20% and a pre approval letter you will still have a shot. - and your options for mortgages get pretty slim if you can't come up with 20% down - many banks won't loan on less than 20% down.
5. Have all your paperwork in order. When submitting your offer, be prepared to show your proof of funds and where you cash is coming from - along with that all important pre - approval letter
6. Forget Lowball offers - Make your best offer now.You may only have one shot to get it right, so make your best offer—what you're willing and able to pay. Base your offer on recent sale prices of comparable properties in the neighborhood so that it will pass muster when the property is appraised. If you hold back, thinking you'll sweeten the offer on the second try, you may lose the property to another buyer.
7. Keep contingencies reasonable and short. I have heard people give advice to drop all contingencies. Bad move! I'd rather you lose the house! Most sellers prefer offers with no contingencies, but you probably can't afford to forgo the protection that contingencies provide if you want to cancel the contract. Offset a financing contingency with preapproval and a strong earnest money deposit.. Include a home-inspection contingency, but tell sellers you will get it done within 7 - 10 days at the most. That way if the price tag on those repairs gets out of hand, you can back out of the deal but not tie up the property for too long.
8. Escalator clause. It's a newer, yet old technique - with which you agree to increase your offer if there's a higher bid from another buyer. Thus you can write into the contract that you will offer $1000 or $5000 etc more than the highest offer submitted. Caution: Make sure you have a cap on that total amount - or you could be in for sticker shock.
9.Write a love letter to the sellers. Re/Max agent Gayle Henderson, of Scottsdale, AZ, says this will help you connect with the sellers, especially if you haven't met them. She suggests such points as: "We're relocating from..." "We see ourselves living in your neighborhood or chose your schools because..." "We especially love..." and "We appreciate your accommodating our visits."
10. Find out the Seller's timeline and offer to meet it. Express your willingness to work with the sellers' timetable to go to closing. If the sellers want to remain in the home for a while after closing, offer them a "lease back" or "rent back," which means that you will be their temporary landlord. This is a legal arrangement, and you'll need to work out the details with your agents and be sure that the sellers keep their homeowners insurance during their stay. If you are bidding on a short sale, make clear to the sellers that you are patient and can wait for the bank's decision.
This article originally appeared on Trulia
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The article Top 10 Tips to Win the Bidding War originally appeared on Fool.com.Michael Corbett is Trulia's real estate and lifestyle expert. He hosts NBC's EXTRA's Mansions and Millionaires. In additional to his regular segments on ABC's The View and Fox News, he is a national best selling author with three critically acclaimed real estate books: Find It, Fix It, FLIP IT!; Ready, Set, SOLD! and Before You BUY!Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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