How to Win a Bidding War
Bidding wars, multiple offers, highest & best, all cash offers… OH MY! This fall’s market is proving to be just as hot as the summer’s crazy buying frenzy due to interest rates being at historic lows and extra cash in people’s pockets from uncle Sam. If you are just starting to look at purchasing a home or you’ve gotten ‘buyer’s fatigue’ after losing out in multiple offer bidding wars, here are some things you can do to get the upper hand and walk away with your dream home!
So the best way to compete in a multiple offer situation is to start building your credit and paying down your debt, NOW! This will also give you time to save for your down payment AND closing cost. I’ve had many clients ask if the seller can pay their closing costs and the answer, unfortunately, is no, not in a seller’s market. You will need to submit a ‘clean’ offer, meaning you are not asking for anything but the house. Anything you ask the seller to pay for; such as closing costs, repairs, home warranty, will eat into the seller's net profit and the seller is only concerned with their bottom line.
It is very important to make sure you are working with an agent that will pick up the phone and have a conversation with the listing agent to find out any particular needs or wants of the seller. You’ve heard the term Highest and Best, How do you know what the best offer for that homeowner is if you haven’t had that conversation. That way you can submit an attractive offer that is tailored to the seller’s unique situation and ensure your offer stands out in the crowd.
There is a very clear hierarchy when it comes to offers. Most people know that cash is king. When it comes to financed offers, the next in line is conventional because it’s the least restrictive as far as the condition of the home. Also, the buyer is a more qualified buyer because they must have a 680 or better credit score and DTI of less than 40%. After your conventional loans, you have your government loans, which are- in order of most attractive to least attractive: VA (loans administered by the office of Veterans Affairs), USDA- for those purchasing in rural areas outside the city limits. The government rewards people that purchase in these underpopulated areas for bringing revenue via property taxes. And last is FHA. Why? The FHA borrower has a credit score that is less than 680 and has a monthly debt obligation that is more than 40% of their income. Notice that FHA loans are at the bottom, very bottom, of the totem pole, so any offer that is going to be financed by an FHA loan goes to the bottom of the pile.
Cash is KING
So what do you do if you don’t have $300,000 just lying around but are competing in a market like Charlotte that is attracting out-of-state cash buyers? Team up with a service like Ribbon that is able to submit a cash offer for you! For a 1% fee, Ribbon will guarantee your offer and even pay any difference in appraised value, should it not appraise for the amount offered based on their valuation system. If you’d like to learn more, check out the brochure here or feel free to give us a call.
Oh and if you want to avoid the whole multiple offer/bidding war situation all together and get help paying your closing cost... let’s talk about new construction!!
Rochelle Ogburn, GRI, SRS, ABR, AHWD
CEO & Founder, The Ogburn Group
704.750.1848 | firstname.lastname@example.org
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