Let's face it...home buyers in our market (Raleigh, NC) are faced with a stark reality that the chances of them encountering a bidding war are high, very high. Demand has surged and inventory is low - I know, I know, I sound like a broken record, but home buyers in the Triangle (NC) region have been faced with this reality since 2018. Triangle region (NC) home buyers have been pushed into a situation where they are forced to outbid one another. Year to date the Triangle region is down -2.5% in new listings and up +5.7% in closed sales compared to this time last year. After being in the top 3 real estate markets in the nation for the last two years. The Triangle (NC) has finally been named the TOP market in the country for 2021. For Triangle home buyers bidding wars are not going anywhere anytime soon, so here are 5 ways to prepare for a bidding war.
1. Find Out What You Can Afford
We all know cash is king but not everyone has the luxury of being able to submit a cash offer. If you are one of the thousands of buyers that need a loan be sure to speak with a lender or your preferred financial advisor! Knowing how much house you can afford is the first and most crucial step to prepare for a potential bidding war. The out of pocket expenses buyers incur throughout a real estate transaction can add up very quickly. Proper financial planning could be the difference between you winning or losing a bidding war.
2. Find The Right Agent For You
If you're really serious about securing your dream home, hiring an experienced buyers agent is a must. It would be foolish not to work with a seasoned real estate agent. The reason being, the seller pays the agent commission on the buy and sale side of the transaction. Meaning it cost you, the buyer, nothing for exclusive representation. Real estate agents have the skill and experience necessary to help you win that bidding war. You can submit an offer but unless your buyer's agent is making an effort to contact the listing agent, in a multiple offer situation, your offer will probably not stand out. Your agent may find out favorable terms, the seller's motivation, or information about the offers you're competing against. This is important because not always the highest offer wins!
3. Due Diligence Fee!
Aside from purchase price, the due diligence fee is an extremely crucial figure. The due diligence fee shows how serious you are about purchasing the house. The due diligence fee is a negotiated amount paid by buyer to seller for the buyers right to terminate the contract for any reason. If the buyer terminates for any reason the due diligence fee is non-refundable and is retained by the seller. This is why an above average due diligence deposit can really capture the eyes of a seller. If you offer an aggressive due diligence fee it shows how serious you are about purchasing the home, giving the seller a peace of mind that you will see the transaction through to the closing table. A typical due diligence fee is around 1% of the purchase price and I have seen due diligence fees as high as 4%. Bottom line is if you want your offer to stand out to the sellers, offer them as much in due diligence as you see reasonably possible. If you find yourself in a multiple offer situation and the offers are very similar, a strong due diligence fee could be the difference between you winning or losing a bidding war.
4. Submit Your Highest and Best Early
If you know you are going to be submitting an aggressive and clean offer. Go ahead and get it to the sellers. What do I mean by a clean offer? A clean offer is an offer that offers very little contingencies such as repairs, loan contingencies, home sale contingencies, time contingencies, and seller paid closing cost. Eliminating contingencies from your offer can make you stand out as a buyer. This shows the seller you are serious about purchasing the home. Yes, sellers do make offer deadlines to give everyone a chance to view and compete for the property. Unfortunately, that doesn't mean they have to stick by them. It is not uncommon for sellers to receive an offer they absolutely can not refuse and will accept before the deadline has arrived. That is why it is important to get your highest and best in front of the sellers as quickly as possible.
5. Purchase Price vs Appraisal Price
In our market it's not uncommon for the purchase price to be more than the appraisal price. When this happens the buyer will need to come up with the difference between the appraisal amount and the purchase price. If you are able to make up the difference let the sellers know! That is very important information to have in writing and submitted with your offer. This gives the seller confidence that if the home doesn't appraise for the purchase price that the buyer will still close on the property.
If you follow these steps you will be on the right path to getting your dream home under contract.