Real Estate Housing Advice: Sellers and Homebuyers
Strategically pricing a home is necessary for maximum home seller profits. Today, experts are seeing an increase in bidding wars and are advising sellers to list their homes at approximately 10-percent below the market’s current values. In return, this is helping sellers gain a 10-percent profit over current home values. While bidding wars are beneficial to sellers, buyers should take warning: if you can’t take the heat, get out of the kitchen.
Some sellers express concern that setting an initial low offering price may turn away buyers, but the exact opposite is true. Setting a lower price actually helps to attract and draw more buyers. Some real estate agents and appraisers believe that if a home doesn’t have a competitive bidding war, then it wasn’t originally underpriced.
What does a buyer do when faced with a bidding war? Before agreeing to participate in a bidding war, buyers should determine their maximum purchase price based on loan requirements and monthly mortgage payments. This will help buyers stay on course with their intended budgets, instead of simply getting caught up in an adrenaline-fueled bidding war. By simply stating their highest and best offer up front, many buyers will have the satisfaction of knowing they tried, while also helping to curb the back-and-forth bidding process.
More often, instead of simply looking for the highest-priced offer, sellers will look at the offer in total, which means they will look at the financing period, see if a buyer would do a rent-back or if a buyer will accommodate their move-out schedule. Additional tips for helping buyers win bidding wars include:
- Cash – An all-cash offers speaks volumes to a seller. It means they don’t have to worry about government-regulated bank financing.
- Plan – Instead of finding a house and then getting pre-approved, buyers should meet with a lender four months in advance to clear up any potential credit issues and pay off debts.
- Pre-Approval – A pre-approval is vastly different from a pre-qualification and lets sellers know that finances and credit have been approved.
- Down Payment – If a buyer doesn’t have enough cash for an all-cash offer, they should strongly consider putting down a minimum of 20-percent.
- Paperwork – If offering all cash, the buyer should attach a proof of funds letter, allowing the seller to know the buyer is aptly qualified to purchase the home and/or property.
- Highest and Best – Starting with a highest and best offer will help prevent a sticky bidding war from ensuing.
- Contingencies – Short contingencies are especially attractive to sellers. Homebuyers should consider waiving contingencies, as this means that home inspections will not factor into the contingency scenario should something arise with the home.
- Escalation Clause – This agreement should never be blank, unless a buyer really does have unlimited funds.
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