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Frequently heard conversations in real estate offices around the country right now seem to revolve around bidding wars over newly listed properties.
In some hot markets, it isn’t unusual for a recently listed house to have multiple offers on the table, sight unseen, only hours after listing online! Due to low interest rates and above-average interest in getting one’s personal space just right, it is definitely a seller’s market right now.
It isn’t unusual to see a home listed for over its actual value already receiving multiple sales offers or for a reasonably priced home to begin to escalate in price once a bidding war starts between multiple families.
If you have fallen in love with a home that is inflated in price, here are some steps for bidding on an overpriced house.
1. Do Your Research
First and foremost, you should find out whether the home is actually overpriced. Is this the result of a bidding war or did the seller list it this way right from the beginning?
To help you determine whether a home has been overpriced, take a look at how long it has been on the market compared to the average days on the market of other homes. If this home has been for sale for months, when the average home in this market sells in 90 days, for example, then the home is probably overpriced.
It is important to note that just telling the seller you think the price is way too high rarely works! You need to take the emotion out of the deal by backing your reasoning with logical facts. What are the average home values in the neighborhood, for example? Just how long has the home been on the market?
Knowing your data will inform a smart offer and help the seller see it your way. This step is the first and the most important part of the process. The rest of the information will not be successful if you do not do your research.
2. Know Your Seller
While you want to try to separate your own emotions from the deal, it is important to know what motivates your seller, so you can use this information to help you negotiate a better price. This doesn’t mean you want to manipulate the feelings of the seller! Rather, it means you need to understand why the seller is selling this home.
After all, what price would you put on a place that contained your childhood memories or some of the best times of your life? Sellers are typically motivated for a few basic reasons. They may need money. They may have had a life change that requires a move. Or they may have an emotional connection to the property.
A seller who needs to move quickly, for example, may be more inclined to take your deal and move along. A seller who has to sell his parents’ home after a death, on the other hand, will greatly appreciate your sensitive acknowledgment of the lifetime of memories held in the house rather than your sarcastic comments on the outdated décor!
Understanding the seller’s situation allows you to put the best options together in your deal to rise to the top of the bidding.
Hot tip: Sometimes a seller isn’t actually that motivated to sell! They love the home they are in and they are just considering selling “if I can get a good price.” These homes will almost always be overpriced, and even if the seller gets the asking price, they may still pull out of the deal. Beware, if you think the seller is not actually motivated to sell!
3. Be the Surest Deal in the Room
In a sea of competing offers, you can enhance your likelihood of being chosen by making sure you actually have the financing in place before the deal is made. Particularly in fast-paced markets where home buyers want to be the first to the table, many make the mistake of actually not lining up the right financing before they make the offer.
This leads to the inevitable fall-through of the deal. Ensure that you are not loading up your contract with contingencies that don’t favor the seller or just make you look like a really paranoid buyer. Sellers have been known to go for less money if the deal is less complicated! Don’t be fussy unless there is a very good reason.
Make up for what you cannot do on price in other offers. Can you put more earnest money down, for example? Can you take care of the fees the seller might incur by wrapping them into your closing costs? Anything that puts more money into the seller’s pocket will enhance your favorability in their eyes.
4. Work With a Real Estate Agent
If all this deal-making sounds exhausting, that’s because it is.
That is why there is a whole field of talented professionals who make it their livelihood to help you negotiate these thorny requests. Working with a real estate agent means you get access to knowledge and bargaining power you might not be able to muster on your own.
For example, your agent will be able to give you background on the seller’s motivations that you may not have gotten to see for yourself. She/he will know the history of the home on the market, as well as the market conditions that will tell you even more about whether the home is overpriced.
Your Agent will be able to tell you about the neighborhood and other pivotal points of concern for your own needs. And, more importantly, she/he will be able to negotiate on your behalf in an objective manner. All these things are to your advantage when you are in a bidding war with other emotional buyers!
