Choosing the Best Offer in a Bidding War

The housing market is enjoying healthy activity, returning values lost during and just after the bust. Buyers are out in a big way, taking advantage of timing, along with near historic low interest rates, low down payment requirements, loosened lending standards, new credit modeling, and all sorts of home loan mortgage products. With such conditions and home prices rising, yet still remaining affordable, sellers are at an advantage in more ways than one. Another fact that comes into play is that inventory levels are still relatively low.

Since the current real estate trend gives buyers more access and many choices, it can create bidding wars. These situations are great for sellers because they are in control. It’s a good problem to have if you’re selling your property, but, it’s not one without pitfalls. While it’s certainly wonderful that you’re receiving multiple offers and buyers are trying to best one another, you want to choose the right one.

Of course, many sellers are fixated solely on price, and, that’s a mistake. Just because a buyer is offering the most doesn’t necessarily mean it’s the right purchase offer to accept. There are other considerations to take into account, such as contingencies. In addition, other factors play a role you can’t ignore.

How to Create a Bidding War for Your Listing

To get the highest return on investment, you ought to create conditions that are ripe for starting a bidding war. Location is the single biggest factor, but, there’s nothing you can do to change where your home is located. However, it does help to point out the best nearby amenities in your listing description. In addition, don’t forget about shopping, dining, and recreational opportunities. Pricing your home right is paramount to selling it. Set the listing price to just under true market value to garner interest. Be sure to deep clean, depersonalize, and remove clutter to make your property look its best.

“The housing market is on the rebound, home prices are rising, and, for the first time in nearly a decade, two or more offers at the same time is a common occurrence. It’s a good problem to have if you’re a seller. But before you lean back in your chair and daydream of the piles of money you’ll be sleeping on, there’s one more thing to think about: Now that you started that bidding war, how, exactly, do you choose the best offer?” —

You can use the power of networking to get even more exposure. Host a real estate broker and agent open house to tap into their reach and bring buyers to you. Ask the brokers and agents to bring their buyers to a private event so they can tour your home. Another great marketing tool is to create a website for your home and you’ll definitely stand out. Include plenty of pictures, along with a diagram of the floor plan, complete with dimensions.

Choosing the Best Offer in a Bidding War

With your home in its best condition and your marketing ready to go, if you receive multiple purchase offers, that’s a good thing, but, you want to choose the right one. When the offers roll in, do these things to make the right decision:

  • Learn details about buyer position. Not all offers are the same, as some come with certain contingencies. One of the most common is final mortgage approval, which can be denied. Other financial factors include the size of their down payment and a large earnest money deposit. The buyer that’s been pre-approved, is making a sizable down payment, and is willing to bring more to the table in a big good faith deposit is in the strongest position.
  • Look carefully at concessions and contingencies. Offers that include seller concessions, such as asking for paying part or all closing costs. While one offer might be above the list price, it could contain such a concession. In addition, purchase offers with contingencies, whatever they may be, ought to be taken into consideration. The bottom line is to look at your bottom line so you get the best deal.
  • Compare timelines. Many purchase offers are contingent on buyers selling their own home. However, there are buyers who submit purchase offers that give sellers a bit of flexibility. For instance, a longer timeline on closing to allow you to stay in the home longer so you can find your next property. This is a big plus since the majority of buyers give short timelines.

One thing you don’t want to do is to string buyers along by making them wait. If you do, it’s likely to backfire, and you’ll receive withdrawal notices before you are even given an earnest money deposit. In addition, be careful with counteroffers, because going about these too aggressively will cause otherwise interested and qualified buyers to walk away.