So you’ve decided to buy a home. It’s an exciting time, but you may feel a bit nervous about entering such a fiercely competitive market. Bidding wars on for-sale properties are relatively common here in Maine. But don’t worry; we have got you covered with some helpful information that can help to put the odds in your favor. Read on for great tips on making that sought-after dream home yours.
With a pre-approval letter from your lender, you're telling the seller that you're a serious buyer, and you've been pre-approved for a mortgage by your lender for a specific dollar amount. If you enter an actual bidding war, your offer will likely get dropped if you don't already have one.
Why should you get pre-approved for a mortgage loan? There are several benefits to getting pre-approved for a mortgage:
- Having a pre-approval certificate in hand gives you greater negotiating power with sellers. In fact, most real estate agents strongly recommend that you get pre-approved before you make an offer on a home.
- You will know exactly how much you can afford to focus on home shopping.
- In many cases, you can get to closing faster because you have already provided much of the documentation needed for loan approval.
It’s also important to consider your monthly costs. You should have money set aside for post-purchase items, future maintenance, and unexpected expenses. Having more savings in the bank will put you in a better position to win any potential bidding wars. Check out our pre-approval page to learn more about getting pre-approval with KFS Mortgage Company.
Find the Right Real Estate Agent
An excellent real estate agent is every buyer’s secret weapon. They’re not only great negotiators and have a solid understanding of the neighborhood you’re interested in, but they also have terrific connections which will benefit you.
Choosing an agent may seem complicated and time-consuming, but they are an essential asset when trying to win a homebuying bidding war. Ensure you interview your top agents to learn more about their personalities, how they work, and what value they bring to your situation.
Seek Homes Under Your Budget and Bid Up
Many homeowners are receiving multiple offers. To avoid getting into a bidding war, you may want to look at homes that are below your max budget. This way, you have room to bid up without dipping into savings or going outside of your target price point.
Determine Your Home Buying Strategy
Navigating a hot real estate market is challenging. Your agent will be a knowledgeable resource when it comes to crafting your buying strategy. Having a well-developed plan sets you up for successful long-term homeownership.
Pay a Larger Down Payment
No matter what type of loan you choose, offering to pay more down is another sign of good faith to your seller. Anytime you can showcase that you’re in an excellent financial position, you should do so. By putting down a larger down payment than you have to, you send the message that you’re serious about the purchase and capable of meeting all financial obligations.
Appeal to the Seller with an Emotional Letter
Writing a personal letter to the homeowner may help your cause. This strategy has proven to be effective, increasing your odds in some markets by more than 50%. Emotions play a significant role in "home sweet home," and your letter puts a live person, and a serious buyer, behind the transaction. Be sure to:
- Tell the seller who you are
- Explain your motivation (why you are looking for a home to buy)
- Compliment the things you love about the home
- Avoid any details of your plans to change the home
Resist the Temptation to Remove Contingencies
By now, you may be wondering what might give you a competitive edge when it comes to winning that bidding war. You may begin to consider dropping some contingencies.
Common contingencies include:
- appraisal contingency,
- inspection contingency,
- and home sale contingency
Contingencies are in place to protect you as the buyer so that if an issue arises during the transaction, you can back out and get your good faith deposit back. Removing contingencies may put you ahead of other potential buyers, but it may not be in your best interest in the long run. Before you drop contingencies, consider the risks involved with each one, and don't take the decision lightly.
Make an Enticing Offer
If you’ve found the right home and are ready to make an offer, your real estate agent can guide you through making an offer. Beyond those options, you may also want to consider other ways to make your offer more enticing while not overpaying, like including an escalation clause with a price cap set at the limit you’re willing to spend.
Now that you have an idea of how to make the best purchase offer, you may have some additional pre-approval or mortgage loan questions.