Bidding war over a home can be stressful
I went to see a really nice house recently and put in a good offer however, so did four other people. We all had to submit our best offers and it basically went into a bidding war. We ultimately lost out, which was extremely disappointing as we were bidding blind. Is this always the case?
— Disappointed Buyer
Dear Disappointed Buyer,
While real estate bidding wars can be an advantage to sellers, they often leave buyers frustrated and disappointed. War can erupt almost as soon as an attractive home in a neighbourhood with strong demand and low supply hits the market, if it's priced well. What happens next thrusts the seller into the line of fire as frenzied buyers pull out the stops in an effort to be the last one standing.
A good clue is if the house is being viewed almost non-stop within the first week of listing. If your agent tells you this they are not being pushy; they are preparing you for what could be a stressful couple of weeks ahead. They are informing you that this one will sell quickly so that you are aware that if you do make an offer, it will have to be a good one with the necessary financial documents to support it.
The process goes like this: sometimes two, but usually more buyers present offers for the same home. The offers are submitted to the listing agent who presents them to the seller. All offers have to be in writing and all offers have to be submitted to the seller.
Sometimes in this scenario all offers are presented to the seller together. This gives each buyer a fair chance and it makes it easy for sellers to compare the terms of the offers. A full-scale bidding war breaks out when there's no clear winner. In these instances, the seller ask the buyers to come back with better offers. Make no mistake it is very stressful for everyone concerned.
If you're planning to buy a home in an area where there's high demand, preparing early can give you an edge. It's imperative that you get your finances — and financing — in order before you start looking at homes. Have your loan pre-approval in hand for your first appointment with a real estate agent. Proof of funds can help too. This includes bank and investment statements showing you are able to pay the deposit and closing costs.
Buyers likely to wind up in a bidding war should structure their offers to make the sale as quick and easy as possible for the seller; sellers should evaluate multiple offers with an eye on the big picture.
Although the purchase price is certainly important, money is not the only motivating factor. It is often the cleanest offer (that is, one with no contingencies) that wins. A buyer who has the home inspected before making the offer can offer to buy “as is”.
Similarly, a pre-offer appraisal may eliminate the need to make the sale contingent on the home appraising for a certain amount. The buyer might also offer a quick closing if the seller is in a hurry, or allow the seller to remain in the home after closing if she needs more time.
The bottom line here is don't be fooled by people saying our current market in Bermuda is soft. There are well-heeled buyers in the marketplace at the moment. If a really desirable property (in any price range) comes onto the market at the correct price, be prepared to do battle if you want it to be yours. If you really want something don't be afraid to go after it, it will hold its value long after the price is forgotten. Paying an extra $20,000 for something you are going to own for 20 years translates into a cost of under $100 a month. Is it worth losing something you love for that little?
Sellers should also be aware that if they are not receiving showings or offers on their property it is almost without doubt because the price is too high. Sometimes, pricing your home at, or just below, market value can result in a bidding war that ultimately drives the price up and over the amount you would have otherwise received.
• Heather Chilvers is among Coldwell Banker Bermuda Realty's leading sales representatives. She has been working in real estate for nearly 30 years. Contact her at email@example.com or 332-1793. All questions will be treated in confidence. Look for Ask Heather Real Estate on Facebook
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