The unfortunate thing about getting caught up in a bidding war is that it is incredibly common that buyers end up hurting themselves in the long run – making the only real winner the seller. Buyers who get caught up in a bidding war and end up competing for a property and go over budget put themselves in a dangerous situation. However, given the state of the California real estate market, bidding wars might be here to stay, (at least for a while). So, if you get caught up in one, make sure you’re prepared.
1. Don’t Get Emotional
First thing is first, remember that this cannot be about your emotions. This is perhaps the toughest part about a bidding war, however, it is completely necessary. For some potential buyers, bidding wars bring out their natural competitive side meaning that they end up just wanting to win – regardless of the actual cost. For others, getting emotionally attached to the dream of owning this particular home can be their downfall. Whatever emotion you are experiencing, do your best to rein it in. When emotions run high, mistakes are made.
2. Don’t Just Know Your Limit – Stick to It
Before you put in an offer you need to know exactly how high you can afford to go. This will be based on your income, down payment amount, and monthly budget. Once you have determined what your limit is it’s up to you to stick to it. If a bidding war breaks out, you need to be ready to stop. Make sure that you do not offer more than you know you can afford as this will only hurt you (and your wallet in the long run).
3. (If You Can) Consider Making a Larger Deposit
A large deposit gives the seller the proof that you are willing to put your money where your mouth is. If you are not sure how much to put down ask your agent to look into what a typical deposit amount is in the area. This is important to know as it can vary quite a bit from location to location. This will give you an idea of what other potential buyers might offer so that you can put down a little bit extra.
4. Limit Your Conditions
A clean offer with no conditions is really the ideal scenario in any bidding war. However, there is one condition you should always include, no matter how confident you are in the property or how badly you want it. Make sure that you have a thorough home inspection done. Make sure that in any offer you make, that condition is in there. After all, if you end up winning the bidding war and get the house, and the house ends up having issue after issue, you could lose a lot more than you bargained for.
5. Never Underestimate the Importance of Pre Approval
One of the smartest things you can do is to get pre-approved before you start looking at houses. Not only will being pre-approved help you to understand what you can afford but more importantly, it can really help you out in a bidding war situation. Think about it, if other people’s offers are conditional on financing, yours is far more likely to be accepted because you have already jumped that hurdle.