How To Deal With Bidding Wars
In this low inventory real estate market any home that is priced right goes fast! Multiple offers and bidding wars are common in this environment. It's great for sellers but stressful and discouraging for buyers who often don’t get the home they really wanted.
Another unfortunate part of this for buyers is that in these bidding wars they have the potential of overpaying. These tend to be emotional times and often buyers will let their emotions get in the way of making a good financial investment. Just in case you find yourself in a bidding war here are some things to kep in mind, so you don't make a bad decision.
Know The Market!
If you know the market you will be able to negotiate with a clear head and be comfortable with your offer knowing the true value of a home. So educate yourself on the market. If you have been shopping for a home for any length of time you are probably getting to know the market pretty well because you have been seeing it first hand. You will learn the range of values and what they should be so that you will be able to keep your offer within that range. When you know the values of homes on the market, you'll be able to make faster and better decisions. Get out and see newly listed properties as they hit the market. Try to be the first offer on that home of your dreams.
Having a great agent working for you is the best way to do this. Your agent should help you to make sure you are making a sound investment! For me, or any other realtor it is not personal, after all, I’m not living there. But I do feel it’s my job to help you with the investment aspect of your home purchase. Since I am mostly referral based when I help you find a good deal, you naturally want to tell all your friends and family about me.
Know Your Budget
The most important number to know is your total desired monthly payment, what will you be comfortable paying every month, You may qualify for more but will that stress you out? Look for a home based on a total monthly payment because there are some variables that will make a difference, your tax bill or are there HOA or condo dues on a property. this will change your spending power and what you can actually afford. If you do end up in a bidding war, you will know what your highest and best offer can be. It’s all about your total monthly payment, that will translate into the price you can ultimately offer.
*Tip* Consult with your lender as soon as you can, this should really be your first step in the home buying process, so you will know your numbers and what you can afford, no sense falling in love with a home that is out of your price range. You'll want to know how much every $10,000 on your mortgage will affect your total monthly payment. You sure don’t want to lose out on a home you love over $7,500 when you find out that the difference in your house payment was only $36 extra per month.
Is this home worth paying more for?
Think about this, how long are you planning on living in your new home? There are some cases where it may be worth paying a little more when you get into that bidding war. Paying a little more for a home than it's worth isn’t always a bad thing when the market is rising. By next year what you paid for your new home could look like a good deal.
*Tip* A home is not only a place to live, but it is also an investment. When purchasing a home, you'll also want to consider things like your annual interest and property tax deductions.
Keep your emotions in check.
Most people don’t negotiate a lot and they tend to get emotional when they do. Getting emotionally involved will often have you overbidding and getting into a win-lose mentality, not a great place to be. This is where your realtor can be a great help, they are not going to be emotionally involved and will be thinking a bit more clearly. This is were knowing that number you are not willing to go above will pay off.
If you have any questions about this or anything real estate related please contact me. I would be glad to help.
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Michael was born and raised in Brooklyn NY. He graduated from Brooklyn College with a degree in Mathematics. His first job out of college was as an engineer tracking satellites. His last career before....