You can spend many long days looking at homes with a real estate agent before you find the perfect home to buy. When you make an offer to purchase a home, the last thing you want to hear back from your agent is that there is another offer in on the house already.
When a seller receives two or more offers to purchase his house at the same time, a bidding war for the home can ensue. The seller can take advantage of the interest in his home to pit all interested buyers against each other and drive the sales price upward. This works in the seller’s favor, but as a buyer, it can cause you to pay more than the house is really worth or than you want to pay for it. How can you avoid a bidding war?
Get Pre-Approved for a Mortgage
When a buyer has two or more offers in hand, he will review them closely to determine which is most likely to result in a successful purchase. One way that you can prove that you are able to successfully purchase the property is to get pre-approved for financing. Your real estate agent can submit a copy of your mortgage pre-approval letter with your offer to give you an edge over the competition.
Make a Realistic and Competitive Offer Initially
Unless you are buying a home in a strong buyer’s market, where the supply of homes for sale is significant and there are a limited number of interested buyers, you may consider avoiding making a low-ball offer on a home. This is particularly true on a home that has only recently been listed on the market. When you make a realistic and competitive offer, your offer may more quickly be accepted. This can eliminate the possibility of another buyer making an offer before your offer has been accepted. It is always a good idea to go over your mortgage prepayment options.
Set a Maximum Sales Price
One thing that you should do prior to making an offer to purchase a home is to set a maximum price that you will pay for the property. Ideally, this will coincide with the value of the property as determined by your real estate agent. If you find yourself involved in a bidding war, refer back to the maximum sales price limit that you have established to know when to walk away from the bidding war. It is easy to get caught up in the emotions of bidding for a home that you want, but you don’t want to wind up paying more for the home than it is worth.
You may also consider working with a real estate agent rather than attempting to purchase a home on your own. A real estate agent can help you to structure a great offer, determine what the value of the property is and negotiate successfully with a buyer if you do find yourself in a bidding war.