Win a bidding war when buying a house in Pasadena – Demand is high, supply is low, and mortgage rates are still very cheap right now. Due to all of this, bidding wars and numerous offers on homes are frequent. The typical scenario is that when you make a home, you will be up against several or many other buyers. Therefore, you must devise strategies for gaining a competitive advantage and differentiating your offer from competitors. Continue reading to learn how to prevail in a bidding war while purchasing a home in Pasadena.
Get Pre-Approved and Have Letter in Hand
Obtaining a letter of mortgage pre-approval is one of the initial steps you should take when trying to win a bidding war while purchasing a Pasadena. It demonstrates your ability to obtain financing and your seriousness as a buyer.
Mortgage pre-approval, experts say, “is crucial, particularly in a bidding conflict. With a mortgage preapproval, a lender determines if it will lend you money to buy a property after reviewing every aspect of your finances, including your credit score and report. Preapproval is based on supporting documents such bank statements and W-2 tax forms.”
A pre-approval letter shows that you can obtain the necessary financing and that your offer is strong, assuming no significant changes to your financial situation. Actually, a lot of sellers will just reject any offer that doesn’t come with a pre-approval letter.
Insert an Escalation Clause
Making the highest offer is sometimes recommended as a strategy to win a bidding war, but it’s not always the best course of action. To avoid spending too much, it is better to include an escalation clause.
“This is how it goes: Consider that you wish to offer $150,000 on a home. Although you anticipate competition for the home, you are unsure of the offers made by your rivals. … [Y]ou can offer to outbid any competing bids by $1,000 up to $155,000. Your real estate agent can include an escalation clause in your offer that states you’ll pay a specific dollar amount over any offer up to your budget limit. By doing so, you can still make the highest possible offer on a home and beat out other purchasers who are paying cash up front.”
To learn more about escalation clauses and how to use them, contact a Pasadena agent at (713) 766-0442.
Reduce or Eliminate Contingencies
Reduce (or even eliminate) contingencies as another good strategy to win a bidding battle. Dropping them can strengthen your offer since “Contingencies are specific conditions that must be met before the sale can be completed.”
To safeguard the buyer, contingencies like a home sale contingency are in place, so keep in mind that this method does entail some risk. To find out how to proceed in this situation best, call a Pasadena agent at (713) 766-0442.
Modify the Inspection Requirements
Some propose skipping the inspection to get an advantage in a competitive bidding process, but that is typically too dangerous. An improved strategy for changing the inspection requirements.
“It can be tempting to forego the inspection requirement when placing a bid on a home, but doing so increases the likelihood of purchasing a home with serious issues. Buyers may choose for a pass-fail examination rather than totally waiving one. With this approach, the seller can keep half of the earnest money in the event that the buyer backs out of the deal due to the inspection and does not demand that the seller make repairs to the home.”
Include Appraisal Gap Guarantee
An appraisal gap guarantee is another strategy you can deploy in a bidding war when buying a house in Pasadena– if, that is, you are financially able.
Currently, many homes are selling for more than their asking price. The issue with this is that lenders normally won’t lend above the appraised value because the property might not appraise for the amount a buyer offers above the asking price. An appraisal gap guarantee informs the seller that you “will pay cash, up to a specified amount, to cover the gap between the appraised value and the bid price” in such a situation.
Personalize Your Offer
You can win a bidding battle by adding your own unique touches to your offer. Including a letter that introduces you and outlines why your offer should be accepted is a typical approach to accomplish this. The personal touch merely gives you a little competitive advantage.
However, keep in mind that this strategy is now viewed negatively in some circles due to the possibility of fair housing complaints. However, there are more ways to tailor your offer, and your agent can support you in these.
Get the Bidding War Advantage
Working with a knowledgeable, neighborhood Pasadena agent is one of the best things you can do to win a bidding war, as is obviously evident by this point. Your agent can help you gain the necessary competitive advantage thanks to her in-depth understanding of the local market and negotiation abilities. So be sure to call us at (713) 766-0442 when buying a house in Pasadena when a bidding war is imminent.