3 Key Survival Tactics To Get You Through A Real Estate Bidding War
The housing market this Spring is getting a competitive edge thanks to hot buyer demand and low inventory across Southern California where average sales prices are above average estimated market values of homes sold in April in our metro area. According to Mark Hughes, chief operating officer here at First Team, “Current market activity belies a seller’s market, a lot of activity, less inventory then those looking. We seemed to have reached close to equilibrium nationwide but the combination of a hot destination and cool metro areas [in Southern California] still skew toward sellers for now.”
A First Team Real Estate agent working in Aliso Viejo, puts it frankly, “There’s no inventory, and there are a million buyers looking for property. A home comes on the market and it’s like a revolving door of buyers and agents.”
According to Redfin 61% of offers written by their agents faced competition from other buyers in March. So the question is – how does a buyer survive a real estate bidding war? Redfin’s research showed that the most common feature in winning offers was a cover letter.
There are plenty more tactics to use as well this summer on the SoCal real estate market and they all boil down to three survival strategies – Be ready, Be flexible and Don’t give up!
#1 BE READY
KNOW WHEN TO SEE A BIDDING WAR COMING
Any city with a market time below one month – the time it would theoretically take to sell all houses in the MLS based on new escrows – is expected to see bidding wars, says Steven Thomas of Reports on Housing. Affordable homes around the county under $650,000 also tend to attract bidding wars because first-time home buyers more than ever are trying to make their way onto the market.
GET PRE-APPROVED
One of the biggest worries for a seller is that a buyer’s loan application could get rejected and the way to put those fears to rest is by getting pre-approved for a loan before you even start house hunting. Not pre-qualified or “I used on online calculator and it told me what I can probably get” but a real pre-approval from a trusted lender. Once you’ve put in an offer you can also go through pre-underwriting which takes you through the loan0approval process – pending the home appraisal – and puts you on par with cash buyers.
#2 BE FLEXIBLE
GET RID OF CONTINGENCIES
In a competitive scenario, you’re not going to get the house if your offer is contingent on your own home selling. When there are 10 other offers that are more simple and straightforward, yours doesn’t stand a chance. But don’t worry, with some flexibility of your own you can figure out a rent back strategy to make everyone happy.
But don’t waive the inspection. While getting rid of contingencies makes your offer stand out in a good way, waiving the home inspection is just not smart. Waiving the home inspection sets yourself up for underlying problems that could end up costing thousands down the road. If you win the house by waiving the inspection and it turns out to have thousands of dollars worth plumbing damage, is it really worth it?
USE A TRUSTED LENDER
Sellers like to see a lender they know and trust with a proven track record. It is your mortgage loan but it’s a good idea to keep your seller in mind when you choose it. A trusted lender gives you – and most importantly the seller – assurance that if you get into escrow with them, they can close it out with ease.
#3 DON’T GIVE UP
Don’t get discouraged if you put in an offer and don’t get a home. You might have to make it through a few battles before you win a bidding war and find a home.
WRITE THAT COVER LETTER
Don’t just put in your offer and pray for the best, write a cover letter for the seller and tell them how much you love their home. You can include photos of your family and build a relationship. If you get to know the seller and create a rapport, they will be much more likely to choose your offer.
Thank you for reading. I hope you found this information useful.
Jeff Pittman, Realtor in Ladera Ranch – Orange County, California