In the real estate realm, there are recognized certainties.
- Real estate is cyclical.
- It’s all about location, location, location.
- Spring (through Summer) is the busiest and most competitive time of year – this is when you will want to use your bidding skills.
New buyers find that this increased activity creates a competitive marketplace. This competitiveness is only aggravated by low inventory or rising interest rates.
Welcome to Spring 2018
To date, the 2018 real estate market has been markedly robust. During our approach to spring, mortgage rates have begun to rise; with 30 years fixed hovering around 4.25%. Additionally, the U.S. economic outlook has become rosier. Together, these factors will create an unusually busy spring where bidding wars will be the norm, rather than the exception.
And if the market wasn’t busy enough, one must consider the fact that the first-time homebuyers deciding this spring might be last with historically low-interest rates, are from the largest generation (the Millennials).
To stay in the game, refine your bidding skills to increase your chances of winning a bidding war. However, you are advised to never ‘fall in love’ with a property. Loving a property while bidding on it will reduce logical, prudent business decisions to emotional impulses.
How to use your bidding skills
To win a bidding war one must prepare sufficiently. It also helps to have a sense of humor and a patient nature because the process can feel a bit like a rollercoaster.
- Begin by determining the maximum purchase price you will consider. The maximum amount accounts for monthly payments for mortgages, taxes, insurance and possibly HOA fees. When you have determined the maximum purchase price, begin your search by looking at homes with a slightly lower purchase to allow yourself the opportunity wiggle, should the bidding war require you to do so.
- If possible, make a cash bid. Many buyers don’t have this opportunity, however, those who can often gain a meaningful edge in a bidding war. Sellers prefer cash buyers because the home sale is simplified with certain risks removed from the sale. Some sellers are even willing to reduce the sales price for an all-cash offer.
- Some serious bidders reach out to the seller in a more personal way. The buyer using this method is attempting to appeal to the seller’s emotional side. Let the sellers know why you want the property (i.e. to raise your family) and the reason you prefer the neighborhood.
- Finally, if the bidders reach beyond your preset limits – DO NOT BE AFRAID TO WALK AWAY. This is easier to do when you not overly emotional, or fall in love with the property.
Don’t let your emotions make a business decision. Just keep looking.
