Bidding Wars: How to Win the Home of your Dreams

by : Eric Badgley

In hot markets, multiple offers and bidding wars on properties can quickly become the norm. In such markets a home may be on the market for less than a week or sometimes only a day before it sells. Often homes will sell even before they are registered in the MLS. As a buyer looking in a hot market, it's important to have the proper ammunition as you enter into these situations. As you can imagine, stress and tension can run high in these fast, high pressure deals, but so long as you are prepared and know what you're getting into there should be no problem winning the home of your dreams. Here are some helpful hints:

Price and terms are the two things that really matter to a seller. Guaranteed, they'll want to fetch the highest price possible,with the best terms available. Both of these areas leave room for negotiation. So, don't think you don't have a chance, just because you've entered into a multiple offer situation. Just know, you want to aim to hit the right note with the seller. You'll want to work with a trusted real estate agent to determine the seller's "hot" buttons. From here you can act accordingly, and of course within your budget and your own needs, to lay down the most appealing offer possible.

In a multiple offer situation it is paramount that you offer the best price you can. In such situations, bidders who really want the property are often willing to bid above the asking price. You need to consider how badly you want this home, how much competition there may be and what you're willing and able to pay for it. If you're in a situation where you can offer something attractively above the asking amount and have agreeable terms, you're definitely putting yourself ahead of the rest.

While price is part of the equation, consider that if you can incur some of the vendor's costs, this too bodes well with your offer. In certain instances a lower offer might win out. One such example might be if a bidder offers to take on the vendor's existing mortgage as part of their offer. Such a condition can eliminate the seller's discharge penalty costs and a lot of hassle. Again, this is a situation where you'll want your agent to get the inside scoop- then you'll know what the seller really wants and have the power to make an offer they can't refuse.

If you're serious about winning a home in a hot market you'll want to have your financing pre-approved and have a pre-qualification letter in hand from a well reputed mortgage broker. This letter should be attached with your offer. Vendors favor buyers who can best demonstrate that they're in a good financial position to close the deal. In this vein, offer the largest down payment you can. The money there is up front, the more confidence the vendor's will have in your intentions.

Finally, don't add unnecessary conditions. It makes sense that the more conditions there are, the less appealing an offer becomes. A vendor wants to choose the offer that looks like it has highest probability to close and without too many glitches. Approval by the in-laws, or the sale of another residence are both conditions that will delay and possibly create a loophole for the buyer to bow out of an agreement. Of course, standard conditions such as financing and inspection should not be waived, unless you fully understand the risks.

If you want to win, don't give anyone else a chance to beat you to it. To own the home of your dreams in a hot market, propose an offer with an undeniably great price and terms that appeal directly to the vendor's needs.