In today’s real estate market, it’s not uncommon for your buyer clients to be faced with a multiple offer situation when placing an offer on a home. These hot seller’s markets are largely due to the lack of inventory across the nation for the last few years. In fact, a study by Redfin showed that in 2013, home inventories were at their lowest point since the financial crash in 2009.
As the economy and housing markets continue to recover, demand has been steadily increasing while supply remains abnormally low. On top of that, interest rates on 30 year loans have remained historically low, which most are predicting will not last much longer. That has resulted in an upsurge in bidding wars for the limited number of houses on the market in many areas.
As an agent, what can you do to prepare your buyer clients for a bidding war in a hot seller’s market? And, moreover – how can you help them win? Here are 5 strategies for winning a bidding war in a hot seller’s market that you may want to consider when negotiating for your clients.
1. Cash deals win wars
No matter if you are in a buyer’s market or a hot seller’s market, cash deals are often the best way to win bidding wars. While most buyers are going to rely heavily on a mortgage to make down payments and to cover the cost of the home, if your clients have the ability to pay in cash, they could have a leg up on the competition.
Cash deals often close faster, they don’t require financing contingencies or long periods of due diligence, and they’re favorable when compared to the intricate details involved in a financed transaction.
2. Cash not an option? Consider your contingencies
If your clients don’t have the cash flow to make a cash deal, you can still let a seller know that they are serious about buying their house by offering limited contingencies. While some contingencies will be a necessity – such as financing and appraisal if a mortgage is required – you could consider shortening the due diligence period or limiting other contingencies that will speed up the process and show the seller that your clients are serious about moving forward.
If you elect to limit the contingencies in the offer, make sure your clients have a full understanding of the risks, and that you’ve taken the time to advise them of what each contingency means.
3. Go big or stay at home
While this strategy will not always win a bidding war, it is one of the most common tactics used by homebuyers if they feel the house is priced appropriately. We’re talking about a full price offer. If you’re going to suggest a full price offer to your clients, make sure you’ve done your research and can show them why the home is worth a full price offer.
Ultimately, a home is worth what someone is willing to pay for it … but if you can back that up with a Comparative Market Analysis on similar neighborhood properties that have sold, your buyers will have the confidence they need to move forward.
4. Offer a fast close
Most sellers are looking to close the deal as soon as possible. One strategy for winning a bidding war is to offer a quick close. Sellers will know that your buyers are serious and that they are willing to move quickly. If your client is not paying cash, it’s important you coordinate this quick close with the lender, as they will often need at least 30 days to close.
5. Figure out what the seller wants
Not all sellers are motivated by money up front or even fast closings. Some sellers are looking for intangibles. Others have conditions for selling you their home. You have to figure out what the seller wants and try to meet their expectations. Make sure you connect with the seller’s agent to determine what the seller’s ultimate goal is for the transaction and then work with your buyers to see where you can sweeten the deal.
These and other tools for navigating a hot market are available through our new course to help agents develop strategies for winning bidding wars. Don’t sit on the sidelines while other agents help their clients win bidding wars. Help your clients get to the closing table by brushing up on your bidding war strategies. Connect today to learn more.