Article by Sally Norton
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In today's crazy market, it's not unusual for one house to receive multiple offers. In other words, bidding wars are the new normal in the real estate world, especially in the most desirable areas with exclusive listings. This situation can force you to up the ante to stand out from the crowd of potential buyers. However, in the moment's excitement, many buyers risk being overzealous and making poor decisions that cost them the deal—or, worse, leave them with a property they regret. So, the ultimate goal is not to be like those buyers, right? In order to help you with the house buying process in this crazy market, we listed below mistakes to avoid when bidding on a home. So, let's begin!
Bidding every penny you have
The housing market in the US is so competitive these days that houses go for tens if not hundreds of thousands of dollars above the asking price. As a result, many buyers are ready to do everything to buy the house they want. So, when it comes to the bidding wars, they are prepared to break the bank and spend every last penny they have. This is not the step experts stand behind. Let's elaborate on why.
Let's say you overpaid the house and find out some repairs need to be fixed immediately, like roofing or plumbing. Now, you're out of tens of thousands of dollars that you spent on the house, and you have a problem finding money for these repairs. Not an ideal situation, right?
Furthermore, in a competitive market, the appraisal may be poor. This indicates that the bank's assessment determined that the home is worth less than what you agreed to pay for it. You'd need a larger down payment to make up for the difference.
So, unless you have a secret fund hidden somewhere or a family member who can lend you money, professionals suggest holding back 10% to 40% more than you can genuinely afford. If you're not financially backed for the house you set your eyes on, that house is simply not for you. Overpaying is definitely one of the mistakes to avoid when bidding on a home.
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Knowing your budget is crucial when going into the bidding war.
Going to a bidding war with many contingencies
You should never enter a bidding war before securing funding and knowing where your money is coming from. We strongly advise against making your offer contingent on the sale of your present home. Why? It's simple. The seller will always choose the bid with the fewest uncertainties. An excellent example of this is an all-cash offer - the closing is quick and seamless.
Unfortunately, most of us cannot provide an all-cash offer, but we may be pre-approved by a bank before entering the bidding war. We can also exclude the selling of our present home from the transaction. You could sell and then rent before bidding on a new property, or you could sell and ask the new owner for a lease-back agreement.
Moreover, it's rarely just about the money. So, determine what else is crucial to the seller and do your best to accommodate his wishes better than anybody else.
Thinking there will be a second chance
Bidding wars are raging in the Chicagoland region. We frequently see prospective buyers miss out on a second opportunity. Prospective buyers believe they will have more opportunities to boost their bids if necessary, and they are frequently mistaken. This is especially important if you're doing this from far away, another state, or even a country. Buying a house remotely is not an easy task, and you don't want to lose your dream home just because you thought you'd get a second chance.
So, what should you do instead? If you find yourself in a multiple bid situation, write your bid as if you would not have another chance to negotiate. This way, you can have a real chance of winning this bidding competition and getting the house of your dreams. The bottom line? Don't play games at this market - you'll never win!
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There are no second chances when it comes to bidding wars.
Using negotiating tips you saw on TV
On real estate reality TV shows, people use the phrase "best and final offer." However, what works on television does not necessarily work in real life. Negotiations in a bidding war never end unless the seller is ready to give up.
Never use the phrase "best and final", as this is rarely the case. If you use this phrase again, the listing broker will not take anything you say seriously, especially your counteroffer.
The vendor will almost certainly consider other major negotiable factors. These include the closing date, a higher down payment, and maybe eliminating a contingency, among other things. If the seller sees the phrase "best and final," they may not return to your bid to discuss changing any parameters other than the price to make the sale work. It's more likely they will pick another deal instead.
That's why you need to rely on expert tips instead. For example, never reveal the sellers even if you've bid the maximum amount you can afford. The seller might take you up on it and remove you from the bidding war altogether. This isn't something you want, right?
Not understanding the true value of the house
One of the biggest mistakes to avoid when bidding on a home is underestimating the value of the house you want to buy. Some bidders are afraid to pay more than the asking price in a bidding war, believing the house is not worth more. They don't understand that sellers frequently price their house slightly below its genuine value to spark a bidding war and have interested buyers drive the price far higher in the heat of rivalry. This is especially the case in today's housing market, with prices increasing constantly.
Buyers who do not offer their top price are less likely to win a bidding war. Instead, people opt to believe that the property is less valuable. As a result, they lose the house they wanted so badly. In order to avoid this situation, you should learn about the current real estate market trends, what features bring the highest ROI, and vice versa.
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If you want to ensure that you get the house, you need to know what mistakes to avoid when bidding on a home.
Moving to your new home
So, now that you know how to seal the deal when it comes to bidding wars, it's time to get the house you want! Once you do, immediately get into planning the relocation. It is another process you need to organize appropriately. The moving crew from peasleyboisemovers.com suggests doing the research before choosing the moving company for your relocation. After all, these guys will take care of all your belongings, so make sure to choose the trustworthy and reliable one.
Now that you know what mistakes to avoid when bidding on a home, you're ready to enter this war like a pro. Ensure you have all the information about the market, the seller, and other prospective buyers. And never reveal your financial possibilities to the seller if you want to stand any chance of buying this home. Good luck!
Jason Gelios is a Husband and Father. After that, a Top Producing REALTOR®, Author of the books 'Think like a REALTOR®' and 'Beating The Force Of Average', Creator of The AskJasonGelios Real Estate Show and Expert Media Contributor to media outlets across the country.