I’m noticing more “bidding wars” on new listings in the greater Seattle-Bellevue area. Because of the lack of non-distressed inventory and current low interest rates, multiple offers may occur driving the sales price higher than the original offered price. Sellers and listing agents may try to create an environment for a bidding war by slightly delaying the review of offers and by pricing the home either at or slighltly under what may considered “market value”.
Here are a few tips to remember should you find yourself in a possible “bidding war”.
Be prepared to provide a strong offer. Get preapproved early. This will help you know how much you qualify for and the seller will most likely require a strong preapproval letter that illustrates you are strongly qualified and that your loan will successfully close.
Determine your financial boundaries. What is the most you want to pay for the home and for your monthly mortgage payment? Bidding wars can be charged with emotion – keep your financial goals in mind.
I often will provide several preapproval letters at staggered amounts for clients when they’re getting ready to make an offer. The letters might start at their preferred offer price and go up to the limit of their financial comfort zone is (of course they have to for that amount).
Work with a reputable lender. It is not unusual for listing agents to contact the mortgage originator to confirm the preapproval letter and to do a “sniff test” of your mortgage originator. If the listing agent is comparing two offers that are essentially the same, the mortgage originator may be a deciding factor.
Consider a shorter time period for closing. Depending on the seller’s situation, for example if the home is vacant, a shorter closing might help you win the bid. Contact your mortgage originator to see what time frame they can realistically close a transaction before writing an offer for a quick close.
Don’t forget the appraisal. Regardless of what you and five other bidders are willing to pay for a home, it still needs to appraise based on what other homes like have recently sold and closed for. The seller does not have to accept a lower appraised value. Your lender will rely on the lower of the appraised value or sales price for your mortgage scenario.
Making a non-contingent offer. Sometimes a real estate agent may suggest that you need to make an offer “non-contingent”. Consider how much earnest money you’re willing to lose if something happens where you elect not to proceed with your transaction (for example, if your appraisal comes in lower than the sales price and you’ve waived your financing contingency). NOTE: making an offer non-contingent on financing may be less risky depending on your personal scenario.
Be prepared to do your home inspection prior to making an offer. It’s not unusal for greater Seattle area homes that are preparing a bidding war to request inspections be done prior to your offer. This will also help you make your offer “less contingent” it’s not subject to an inspection.
Being as prepared as possible may help give you an advantage over other offers. The sellers and listing agent wants to be assured that what ever transaction they select in a multiple offer situation has the best odds of successfully closing.
I am happy to assist you with your preapproval and financing of your next home located anywhere in Washington state. I have been originating mortgages, including conventional, FHA and VA at family owned and operated Mortgage Master Service Corporation since April 2000. We are a well respected correspondent lender established in 1976 by the Porter family.