So you have finally found the home you want to buy, but it appears everyone else in town has the same idea. When the demand is high and the supply low in the real estate market, you have to use some ingenuity to emerge as the winner in a bidding war. You are also going to need some experts on your side, including a knowledgeable real estate agent and an attorney experienced in dealing with the various legal issues that arise in a real estate transaction.
Obtain a preapproval letter
Prequalification is a process that verifies your income and lets you know how much your bank may be willing to lend for the purchase of new home, but preapproval goes further. You can move more quickly on an offer because you will have a letter in hand from the bank stating that the lender is underwriting your application and is merely awaiting the appraisal.
Put in an escalation clause
An escalation clause states that if offers come in that match or exceed your initial bid, you will increase your offer incrementally until a certain limit is reached. This shows the seller that you have a strong interest. Meanwhile, you have protected yourself by staying within your budget. You should be prepared to walk away from the deal if you are eventually outbid.
Do not be demanding; instead, be flexible. If you are aware that other bids are coming in, stick to the main points and limit the contingencies when putting together your offer. Be flexible on the closing, too. For example, allow the seller more time to move out. If the house is already vacant, you might offer to close in a shorter time than normal, which could put you ahead of other prospective buyers.
Pen a letter to the seller
It may strike you as silly, but the fact is that “love letters” about houses carry weight in bidding wars. If you have found the perfect house, write a letter to the seller explaining why. Refrain from sappy verbiage; just write with sincerity and state in a straightforward way why you and your family love the home. A letter like this will make you stand out from the crowd and could tip the sale in your favor.
Rely on legal help
A real estate professional, one who knows the local market well, will help you win your dream home. You can also rely on an experienced attorney to review the entire transaction to ensure that all legal issues are properly addressed and that your interests are being served.