Winning Strategies for Grand Rapids Bidding Wars
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The summer market is crazy busy. Today, I’ll discuss some key strategies for a buyer to navigate a multiple offer situation. The underlying concern for the buyer is overpaying. There are ways to avoid overpaying, and still get the home you desire.
We always, always recommend that the first thing you do is get a pre-approval from a lender. You could be up against one other offer or ten other offers. A seller won’t consider your offer without a pre-approval.
A pre-approval is much stronger than a pre-qualification, because a pre-approval letter means that the lender has verified your credit score and your income. Pre-qualifications can turn into a disaster when the lender does their homework two weeks later and discovers that the buyer wasn’t telling the truth about their income.
My second strategy is use a reputable lender. Find out if they have a positive reputation in the real estate industry. Agents advise sellers on which lenders are best, so your choice of lender could have an impact on the seller’s agent, who would influence the seller’s decision on your offer.
The appraisal process protects you from overpaying for the home.
Next, it’s important to know the score. Learn about other offers. Find out how many offers you’re competing against. Going up against one other buyer is different than going up against ten. Know the story of the home as well; a home that’s been vacant and on the market for 180 days with one competing offer is much different from a home that has been on the market for one day with three competing offers. If you know the story, you can put your offer in a strong position.
It’s important to understand that multiple offers usually result in the sales price being higher than the list price. If you really want the home, it’s okay to go over list price. Have your agent do a market analysis first to make sure you’re not overpaying.
Also, understand that the appraisal process protects you from overpaying for the home. The lender doing your mortgage will order an appraisal, and that appraisal will determine the true value. If you paid more than the true value in the purchase contract, typically the seller will do their best to match the appraised value.
Lastly, ask yourself this question: would I make an offer on this home if it was $5,000 more than it is today? If the answer is yes, then you know that the list price is arbitrary. A list price does not necessarily match the true value of the home. Buyers often overthink the list price. If you can afford $20 more in monthly payments, then you can afford to go $5,000 over the list price. It’s hard to make a mistake as the market continues to improve.
This is an exciting market, and homes are selling fast. Make sure you hire an agent who does their due diligence and gives you quality advice.
If you have any questions about today’s topic, or about real estate in general, give me a call or send me an email. I’d love to help you!