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How to Win a Bidding War

 

A lot of would-be buyers are put off by the perception that you can’t win a decent house in DC’s competitive real estate market. While it’s true that competition is stiff for homes in the District, it is still possible to win a great house without breaking the bank, assuming you take a smart approach. Here are tips that will help you emerge victorious when competing for your next home.  

 

Gather intelligence

When making an offer on a home, knowledge is power. Start by attending the open house, even if you’ve already visited the property. Does it feel the entire neighborhood is meandering through the home? That’s a strong sign that multiple offers will be submitted. Your contract strategy depends on knowing whether you’re in competition, or going it alone.

 

Be sure to ask the listing agent about any particular seller preferences for the contract (e.g., timelines, “as is” clauses, or relocation addenda). In DC’s seller’s market, it may be challenging for a seller to find their next property. In that case, you may choose to enhance your contract by offering an extended and/or free “rent back,” in which you allow the sellers to remain in the home for certain number of days or weeks after closing, giving them time to settle on a new house.

 

Don’t be a dark horse

Some buyers are reluctant to reveal themselves when negotiating a purchase contract, but this is usually not the best policy when you’re competing with others. Consider the seller’s perspective. In a situation where two or three offers are similar, sellers are more likely to accept the one that gives them confidence. For this reason, buyers who document their financial strength and creditworthiness to sellers are more attractive than those who remain a mystery.

 

Some buyers are inclined to submit personal letters about themselves along with their contract. This can be helpful, but is generally less important than demonstrating your ability to deliver funds. Additionally, to convey a sense of decisiveness about the purchase may also be helpful. Sellers want to know that the person making an offer is well informed and won’t panic when an inspector points out that the heating system is 100 years old, or whatever the case may be.

 

Write a compelling offer

Once you’ve determined that you're in competition, you need to decide on your price and whether to use an escalation clause. Once you’ve determined how high you’re willing to go (it helps to sleep on that decision), determine with your agent whether to offer that amount, and then hope for a negotiation, or to “escalate” your offer. With escalation clauses, you include a base price and a max price, with the latter being kicked-in by a competing offer. For example, you could write a contract with $500,000 as a base price, with language stipulating that your offer increases to $3,000 more than a competing offer, up to a max of $515,000. In this scenario, a competing contract in the amount of $510,000 would automatically increase yours to a final sales price of $513,000. This is a good way to hedge your bets in case other offers do not come in, or they come in lower than expected.

 

Keep in mind that money is important, but so are a number of other factors. Offering a higher than expected deposit does not change your bottom line, but demonstrates to the seller that you are serious about the purchase. There are also a number of standard contract contingencies that can be waived or modified in order to sweeten a deal that may not be the highest. For example, you could do a pre-inspection of the home (for a fee) in order to waive that contingency in the contract. If economics allow, you could also modify an appraisal contingency to state that you would proceed with the sale despite a low appraisal up to a certain deviation from the sales price. This approach may be especially helpful in neighborhoods where home values are rising quickly.

 

The bottom line is that there are countless ways to strengthen a purchase contract. You don’t need to be on the losing side of the competition for your next home. Contact me today to learn more!

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 Colleen Cancio, GREEN

Colleen@WhereDoYouDwell.com


(202) 460-0828

 

Dwell Residential Brokerage DC 

Green Designation Realtor Capitol Area

 

 

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