many hot housing markets, bidding wars have been breaking out on a regular
basis -- and some house hunters are getting beaten out time and again.
But it's not always about who has the most
money. Sellers will accept lower offers if it means less hassle.
means getting pre-approved for a mortgage and having all your paperwork -- your
pre-approval, proof of income, work history and bank statements -- in hand.It
also helps to have your lender at the ready so you can act fast."What
sellers really don't want to do is waste time," said John Walsh, president
of Connecticut-based lender,Total Mortgage.
But first you have to beat out all of those
how you can win over a seller and get the house you want:
with cash. The best way to get a seller's attention is with cold hard cash.
That is, if you can afford it.
fact, all-cash sales have become extremely common,
representing more than 40% of recent sales.
since the housing meltdown, getting a mortgage has become a longer and more
arduous process. Securing a loan can take weeks-- and there is always the chance it will
all-cash offers, sellers are sure the buyer is qualified, said Walsh. And they
won't have to wait through a long, drawn-out loan approval process.
on the market and the seller's situation,they may even accept a lower offer just
because it's in all cash.
Get your mortgage ready in
advance. Don't have a ton of cash to put on the table? Try
pre-underwriting a mortgage instead.
pre-underwriting, lenders take the pre-approval process a step further by
reviewing all of the income and asset documentation that they would typically
need to approve a mortgage.
Housing market newbies beware. Sellers look favorably on pre-underwritten
offers because they don't have to worry that the buyer's mortgage application
will be rejected. All that needs to be done after the contract is signed is to
complete an appraisal.
lenders even offer a guarantee that if they can't complete the transaction
because they made a mistake or if lending rules have changed, they will refund
the buyer's deposit.
flexible (but not foolish) with contingencies. Contingencies are
clauses that allow buyers to back out of deals if specified conditions are not
met. A bidder will sign a contract to buy a home contingent on the appraisal
coming in at or over the selling price, for example.
common contingency clause is the right to back out if you can't find a buyer
for your home. In hot markets, buyers often waive this right because they
figure it should be easy to sell their old home quickly. In less heatedmarkets,you could
get stuck paying two mortgages.
contingency you should think twice about before waiving is the home inspection.
Should the inspector discover a major problem, such as widespread termite
damage or a badly cracked foundation, it could cost far too much to fix. You
want to know that before making a commitment you can't back out of, said
first. See the home as soon as it comes on the market. That way, you
can get your bid in early and preempt later offers.
estate website, Zillow, has a new service that can help. Its "coming
soon," tool enables real estate agents to signal that they're about to put
a home up for sale.Homebuyers
can find these potential properties by neighborhood or city.
to outbid everyone. Do you really want the place? You can outmatch every
other bidder by creating a contract with a so-called "escalation
clause basically states that you will pay $1,000 or $10,000 more than whatever
the highest bidder offers.
the seller gets an offer for $200,000, your bid will automatically jump to $201,000
if you have an escalation clause.
The danger with escalation clauses is twofold. "You
never really know if the other offer is real," said Wei Min Tan, an agent
with Rutenberg Realty in New York.
"Sellers can ask someone to submit an offer just to get the buyer to raise
The second problem is that the final home price may be a lot
higher than the appraised value of the home. That could jeopardize the mortgage
or force you to come up with a lot of cash to make up for the shortfall.
way to prevent that from happening is to place a cap on the bid, offering to
pay no more than 10% or 20% above the original asking price.
Using a cap means, however, that you may not end up with the
home in the end.