Last month we talked about bidding wars and strategies for homebuyers on how to stand out in the crowd. With low inventory in Southern California and overwhelming buyer demand, more and more home sales are attracting bidding wars in our current seller’s market. In fact, according to a recent study from Redfin, more than half of their offers for homes faced competition in June for the second month in a row. So what if you’re the one having to choose from all those competing offers – How do you make the decision?
Most people think the highest price, right? Well, not necessarily. There are several different factors to consider when trying to pick the best available offer. Don’t judge an offer by the price on the cover, it’s what’s on the inside that counts. There is no magic formula, but here are the most important points to look out for when the offers start flowing after your safe home showings:
A good closing date, little to no contingencies, and a mortgage approval are all contingencies that pan out in your favor. By waiving contingencies, buyers have less wiggle room and the deal is more likely to close on time and go off without a hitch.
And if one or more of the bidders asks for a contingency to keep the deal on hold until his or her property sells, that’s an easy buyer to eliminate from consideration. You don’t want to be caught waiting for the domino to fall, because it might not.
Earnest money, cash, and secure financing. Earnest money isn’t a down payment but it is a sign that your buyer is seriously committed. As for cash, it’s not always the best option but it’s definitely one of the easiest. If you choose a cash offer that means there’s no need to wait for loan approval and you could even skip the appraisal.
There is something to be said as well for a buyer with trustworthy, solid financing. Taking an offer that’s $5,000 from an out of state lender you’ve never heard of might be risky but if they’re a strong lender you or your agent has worked with before, the extra money could be worth your time. Keep in mind, cash offers are always lower than financed offers.
Stick to a deadline and your gut
If there are two or more equally attractive offers, you can respond to more than more one buyer. In this case, you can ask for what most people call a “best and highest” offer from each and after that make your decision. Be upfront about a timeline/deadline and once you get them in, stick to your gut, and pick the one that feels best. If your bidding war goes on too long, potential buyers might just walk away.
A deadline narrows the focus for potential buyers and gives everyone the chance to strengthen their offer. An even playing field is the best practice and the best way to lay all the facts out on the table and find the offer that feels right for you.
The SoCal real estate market is booming this summer for sellers with low inventory and lots of buyer demand. If you’re planning to list your home, team up with a First Team agent to help you make sense of the chaos and close on your own deadline.