David Higgins' Blog
2 Heron Way, Hingham, MA 02043
Ready to submit an offer on a house? Not so fast. First, you'll want to consider a few key questions, including:
1. Can I afford to buy a house?
If you find a house you like, make sure you can afford the monthly mortgage payments. By doing so, you may be able to avoid costly, time-consuming problems down the line.
Ultimately, getting pre-approved for a mortgage can make a world of difference, particularly for a homebuyer who is ready to submit an offer on a home.
With pre-approval for a mortgage, a homebuyer will understand exactly how much money is at his or her disposal. As a result, this homebuyer can avoid the temptation to overspend on a house.
2. Should I submit a "lowball" offer?
For many homebuyers, it may seem like a good idea to submit a "lowball" offer on a house. But doing so may be problematic for a number of reasons.
If you submit a lowball proposal, a home seller is unlikely to take your bid seriously. As such, this home seller may dismiss your offer and move on to other proposals quickly.
In addition, a lowball offer may cause you to miss out on the opportunity to acquire your dream residence.
When you locate the perfect residence, there is no need to leave anything to chance. If you submit a fair proposal that meets or exceeds a home seller's expectations, you can avoid the risk of losing your dream house to a rival homebuyer.
3. How much should I offer for a residence?
We've already established that a lowball offer is rarely, if ever, a good idea. Now, you'll just need to determine what differentiates a fair proposal from a lowball one.
A fair proposal accounts for the needs of both a homebuyer and home seller. It should be based on the current state of the housing market as well as the condition of a home.
For instance, if you're operating in a buyer's market, there is likely to be a broad assortment of homes available. This means a home seller may need to lower his or her expectations due to the sheer volume of quality residences currently on the market.
Don't forget to study the prices of recently sold homes in a particular city or town too. This housing market data will help you better understand how a residence you're considering stacks up against comparable houses so you can submit an appropriate offer.
4. Do I need a real estate agent?
A real estate agent will take the guesswork out of buying a home, and for good reason. This real estate professional can help you prepare an offer and will negotiate with a home seller on your behalf. That way, you can streamline the process of going from homebuyer to homeowner.
Hire a real estate agent before you submit an offer on a house – you'll be glad you did. A real estate agent will guide you along the homebuying journey and ensure you can secure a great house at a price that fits your budget.
2 Heron Way, Hingham, MA 02043
You and your agent search for weeks to find the perfect home and suddenly, there it is on the market. It’s in the highly sought-after neighborhood of your dreams and, amazingly, the asking price is in your sweet spot. You and your agent follow tried and true negotiation tactics only to learn that the seller has multiple offers to consider. Entering a bidding war to get your dream home creates all kinds of complexities. Having the right professional to help you navigate the process may mean the difference in winning the war or not.
Know your agent’s limitations
If your agent has never participated in a bidding war, ask him to seek advice from a knowledgeable colleague or his lead broker. Entering negotiations blind will not help you, but you and your agent can learn from the process with some expert guidance.
Know your financial limitations
The frenzy of a bidding war and your competitive nature to win may push you to increase your bid outside the range that’s comfortable for your budget. The thrill of winning is soon dashed by buyer’s remorse when paying your mortgage each month puts limitations on your household that you didn’t intend.
Learn how to stand out
Not all bidding results center on money. Sometimes the person that wins the bid isn’t the one offering the most money. Home selling is as emotional for most sellers as is home buying. Owners selling the home they lived in and raised a family in often want to know that the home’s buyers will do the same. So, if some of the bidders are investors, but you’re buying to make a home for your family, let the seller know. Write a personal letter to the seller about what owning their home, living in their neighborhood, sending your children to their local schools, would mean to you and your family. Let them know you’ll cherish the home the way they did.
Add an escalation clause
If you suspect there will be a bidding war on the home you’ve selected, include an escalation clause in your offer. Such clauses are addenda that automatically increase your bid by specified amounts up to a set maximum that you’re willing to pay. So, if you make an offer and someone outbids you, your agent can immediately increase your bid by the predetermined amount up until someone else outbids your maximum. This sort of clause always ensures you have the top proposal to that point.
Be open to negotiation on contingencies
When you’re in a bidding war, sometimes the least complicated bid wins the day. That is, proposals with fewer requirements such as specific closing timing, move-in dates, minor repairs, home warranties, etc., and who pays more in the closing costs can tip the scales in your favor. On item not to dispense with, however, is home the inspection.
If you think a property you want might end up in a bidding war, seek out an agent with plenty of experience to help you navigate the complexities involved.