How to: Advise clients about bidding wars

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The broker is often a homebuyer’s first pit-stop on the way to home ownership but once that transaction is completed buyers may have to deal with the shark-infested waters that surround bidding wars. Erica Smith and Joy Patterson from The Condo Chicks provide some tips to pass on to your clients to better prepare them; and instill in them the confidence that you know your stuff.

Choose the Right Sales Representative

It is often too easy to get caught up in the emotional aspect of a multiple offer situation, so it is important to work with a sales representative who has your best interest at heart. It is your representative's duty to educate you on the true value of the property and to advise you when you are reaching beyond not only your budget, but beyond what is fair market value. Remember, there will always be another property that comes up that will meet your criteria.

Be Financially Prepared

Not only should you have your financing in place to purchase a property, but you should have enough funds on hand for a deposit.  In a competitive situation, we always advise our clients to have their deposit ready as it will need to be provided within 24 hours of acceptance.  The last thing you want is to be under pressure to free up funds to meet the terms of the agreement.

Limit Conditions

Simply put- the cleaner the offer, the better. It's always better to do your due diligence in regards to potential conditions prior to entering a multiple offer situation. For example, if you are putting an offer on a home, it is essential to have a home inspection done to confirm that the property is in good shape.  It would be a good idea to have the inspection completed prior to the offer date so the condition can be removed.  This will result in a cleaner offer and can give you an advantage over competing offers.
 
Respect the Seller's Wishes

Everyone knows that the seller wants to generate a bidding war to generate more return for the property.  Keep in mind that the financial reward is not always the only criteria that the seller wants met when entertaining offers. Besides a clean offer, the closing date can also be equally important to the seller.  To give yourself an advantage, try and stay as close to the desired closing date of the seller as possible.  The timing could be more important to the seller than you realize and compromising on this date can give you an edge over the others being reviewed.
 
  • Scott on 2014-03-26 11:45:11 AM

    It's interesting that there is nothing mentioned about a financing condition. While I agree that a cleaner offer is a better one, in a situation where the buyer is paying over the list price, he could be exposing himself to undue risk (i.e. the value is not supported in the appraisal of the property), potentially leaving the buyer on the hook for more cash outlay than they expected...

    I think this is especially important in a default insurance situation, or where the client just has enough for their proposed down payment.

    Just a thought.

    Scott

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