How to Prepare for a Bidding War

Javier Vivas, Director of Economic Research at realtor.com, explains:

“COVID-19 has accelerated earlier trends, bringing even more buyers than the market can handle. In many markets, fierce competition, bidding wars, and multiple offer scenarios may be the common theme in the weeks to come.”

 

Here are three things you can do to make your offer a competitive one when you’re ready to purchase a home:

 

1.   Be Ready –  Getting Pre-Approved (#1 above) and Knowing What You Can Afford (#2 above)  Show You Are Ready!

A recent survey shows that only 52% of active homebuyers obtained a pre-approval letter before they began their home search. That means about half of active buyers missed out on this key part of the process.  In August 55% of home sales resulted in a bidding war – that’s a lot!!

Buyers who are pre-approved are definitely a step ahead when it’s time to make an offer. Having a pre-approval letter indicating you’re a qualified buyer shows sellers you’re serious. It’s often a deciding factor that can tip the scale in your direction if there’s more than one offer on a home. It’s best to contact a mortgage professional to start your pre-approval process early, so you’re in the best position right from the start of your home search.

Many sellers and listing agents in the South Florida area require a pre-approval with a contract and it is a definite advantage in a bidding war.

 

2.   Present Your Best Offer

In a highly competitive market, it’s common for sellers to pick a date and time to review all offers on a house at one time. If this is the case, you may not have an opportunity to negotiate back and forth with the sellers. As a matter of fact, the National Association of Realtors (NAR) notes:

“Not only are properties selling quickly, but they are also getting more offers. On average, REALTORS® reported nearly three offers per sold property in July 2020.”

Make sure the offer you’re presenting is the best one the sellers receive. A real estate professional can help you make sure your offer is a fair and highly competitive one.

 

3.   Act Fast – Homes are Under Contract or have Multiple Offers within days of Coming on the Market.

With existing homes going like hotcakes, there’s no time to waste in the process. NAR reports how the speed of home sales is ramping up:

“Properties typically remained on the market for 22 days in July, seasonally down from 24 days in June and from 29 days in July 2019. Sixty-eight percent of homes sold in July 2020 were on the market for less than a month.”

In addition, NAR notes:

“Total existing-home sales…jumped 24.7% from June to a seasonally adjusted annual rate of 5.86 million in July. The previous record monthly increase in sales was 20.7% in June of this year. Sales as a whole rose year-over-year, up 8.7% from a year ago (5.39 million in July 2019).”

As you can see, the market is gaining steam. For two consecutive months houses have sold very quickly. Essentially, you may not have time to sleep on it or shop around when you find a home you love. Chances are, someone else loves it too. If you take your time, it may not be available when you’re ready to commit.

 

Bottom Line

The housing market is very strong right now, and with so few houses available n the market today, buyers are scooping up available homes faster than they’re coming to market. Being ready for a bidding war is essential for prospective homebuyers

If you’re planning to purchase a home this year, let’s connect to discuss the trends in our current area, so you’re ready to compete – and win.