Winning a bidding war on a property requires smart tactics. When multiple offers come in, the seller's listing agent compiles them into a spreadsheet for a detailed comparison. Before placing your offer, you must calculate your risk tolerance and consult with your lender. With this guide, you can explore the various strategies that we have seen used and you may pick the ones that suit you best.
Below are key terms from the Agreement of Sale that will be included in the spreadsheet:
- Price
Offering at least the asking price is essential, but it's crucial to gauge the competition too. By checking the average sale-to-list price, you'll get an idea of what others might offer. Be prepared for potential bids far above the average, especially when we know the home is getting a lot of activity.
- Price Escalation
A winning tactic is the utilization of the Price Escalation Addendum. Set a cap at a price you're comfortable with, then specify how much you'll escalate above other offers until reaching that cap. For instance, if a property is listed at $750,000, you could offer $750,000 with an escalation up to $850,000 in increments of $10,000. If a competing offer goes up to $825,000, your offer automatically jumps to $835,000. This way, you stay competitive while keeping control of your bid.
- Deposit
In some cases without contingencies, buyers make their deposit non-refundable and payable directly to the seller. Though risky, it showcases the buyer's unwavering commitment to completing the transaction and helps them to stand out from the competition.
- Settlement
You should always propose a settlement date that reflects the seller’s preferred date.
- Financing Contingency
Almost a third of all buyers nationally are paying with cash. One way to compete against potential cash offers is to waive your financing contingency. You can still get a mortgage on the side, but your offer isn’t contingent on you actually getting the mortgage.
- Appraisal Contingency
When getting a mortgage, consider an appraisal contingency that stipulates that you would cover any gap between the appraised value and the sale price.
- Inspection Contingency
It is almost a certainty that someone is going to waive their inspection contingency in their offer. This is risky, but one strategy that our clients are using is to inspect the property before ever making an offer. During your walkthrough, our recommended home inspector will assess the property and advise you on whether waiving the inspection is advisable. While not a substitute for a full report, it offers valuable insights for your decision-making process.
- Home Sale Contingency
A home sale contingency is unlikely to be accepted. If you need your current home's proceeds to buy the next one, consider discussing bridge loans with your lender. These short-term loans, lasting 6 months to 1 year, facilitate purchasing a new home while waiting for the sale of your current one. Bridge loans act as a financial bridge, providing funds for your new property without waiting for your current home sale to close.
- Township Use & Occupancy
Before selling a home, many townships and boroughs conduct inspections, typically handled by the seller. However, some buyers now offer to be responsible for these local Use & Occupancy inspection in their offers. This allows them, in most cases, up to a year after settlement to make any necessary repairs. We can supply you with the checklist for each municipality so you know what to expect.
- Transfer Tax
Buyers are now offering to cover the seller's portion of the transfer tax, which can vary depending on the location. It could be 1% in most of the suburbs, 1.25% on parts of the Main Line and 2.140% in Philadelphia for both the seller and the buyer. So, if a buyer is paying both sides, their full transfer tax to be paid at settlement would be twice that amount. This strategy adds another advantage to make your offer stand out from the competition.
DISCLAIMER: These strategies all come with risk. You do not have to use these strategies. You must calculate your own individual risk tolerance before doing so.