If you are house-hunting in a market where properties routinely go under contract for above listing price after just a few days, you may be worried about your ability to snatch up your dream home quickly without paying too much. What should you do to improve your odds of success if you find yourself in a bidding war with other potential buyers? Should you continue renting in hopes that the bubble will soon burst? Read on to learn more about finding your dream home without overextending yourself in a seller's market.
When should you enter a bidding war for a home?
In certain markets, buyers can snag their dream home simply by putting in an offer for list price, often with a number of contingencies -- like the ability to rescind the offer if the appraisal is less than the offer price or the ability to back out if the home inspection reveals the presence of radon or other potential hazards. However, in areas where new homes move on and off the market quickly, an offer for list price is likely to be ignored entirely.
In these markets, buyers will often submit offers for more than list price and include an escalation clause -- a provision that allows the offer to automatically increase to a certain dollar threshold if competing offers are received. For example, if a home is listed for $300,000 and you think it may sell for $320,000, you may want to make an offer for $310,000 and include an escalation clause that will allow you to offer as much as $325,000. This ensures that if a competing offer comes in at $324,000 with no escalation clause, your offer can win.
Entering a bidding war can be stressful. It's important not to let your emotions get the best of you during this process -- by calmly and logically evaluating the financial value of the home you're seeking, as well as some non-financial lifestyle benefits, you should be able to decide whether a specific home is worth the inflated cost. If you're looking for houses in a specific school district or you would like to be close to your parents for childcare purposes, it may be worth paying a bit more for a home in a particular neighborhood. On the other hand, if you have more flexibility in the location of your home and aren't on a strict timetable, you may want to sit out from the auction-style home purchase process and make offers only on homes that aren't likely to be sold for more than list price.
What are some other options to help you find a home in a quickly-moving market?
One side effect of a hot seller's market is that buyers often stop looking at homes that have been on the market without much activity. If a home was priced too high for the local economy during its initial listing and didn't get many views during its first few weeks on the market, it may have languished unseen while lower-priced properties were quickly snatched up. Many house-hunters will set their online search parameters to look only at properties that have just been listed, and performing a new search every few days won't reveal those homes that have been on the market for a longer period of time -- even if the sellers have since reduced the price dramatically. With many homeowners eager to sell in a hot housing market, you may be able to snag one of these languishing homes by offering list price rather than adding an escalation clause to your offer.
Talk to a company like Ebh Properties Inc for help or ideas to find the perfect home for your wants and needs.Share