When inventory for home shopping is low you may find yourself in a bidding war. No single strategy can guarantee that you win a home bidding war. Here are some tips that you can use to put yourself in a position to compete.
Here is a list of steps you can take:
- Get preapproved for your mortgage. Show that you can purchase a home with a preapproval letter. Don’t confuse the mortgage pre-approval with a prequalification. Qualification merely estimates how much a bank might be willing to loan you. A preapproval evaluates every detail of your finances and decides on the loan you qualify for.
- Pay cash or put more money down. Buying a house with cash is more attractive to sellers because it eliminates the chance of financing falling through.
- Be flexible on the closing date. Extra time to close may be attractive to a seller who otherwise might have to spend time finding another home or on moving expenses.
- Limit the contingencies. Contingencies and home purchase contracts allow the buyers to walk away from the deal without losing earnest money. But in a bidding war situation, you want to use contingencies carefully.
- Use an Escalation Clause. You can strengthen your offer by using an escalation clause. It essentially is a contract addendum that states you’re willing to increase your offer up to a certain limit if other offers come in that match or top your initial bid.
