Tuesday, April 5, 2022 / by Sonya Reiselt
Bidding wars are common and are happening across the county for home buyers. When the real estate market heavily favors home sellers, this is not uncommon. As a home seller, this can result in a much higher dollar sale, but it can also be a daunting process to review since you need to choose the best offer that meets all your needs…and that doesn’t always mean the highest bid. While your potential home buyers are researching what they need to do to win a bidding war, you need to know how to effectively handle one.
Can you create a bidding war for your home? Let’s put it this way, you can create a higher demand for your home in these ways. First, if your home is listed in the MLS on a Monday, state that showings will not begin until Friday. This will give potential buyers 4 days to view your property on the internet, gaining interest, before being allowed to actually tour it. You can also set an offer deadline date and clarify that you won’t accept any offers before that time. This creates an urgency for anyone seeing your home between showing time and offers deadline date to submit their best offer upfront. It also ensures that all interested parties submit their bids on that deadline date for fear of losing out on the property.
What are you evaluating when reviewing offers?
Obviously, you’re looking at the offer price of the home first. But remember, the highest bid isn’t necessarily the best offer. What else should you consider?
Do other offers have an escalation clause? An Escalation Clause allows the buyer to increase their offer amount over the highest bidder. They will also set a Cap Price. For example, if your home price is set at $325,000, the buyer could write their offer for $335,000 with an Escalation Clause of $5,000 for any offer over $335,000. They would then set a Cap Price, for instance at $350,000. In this case, $350,000 would be their top offer.
How much Earnest Money is the buyer putting down? Normally 1-5% of the purchase price is put down as earnest money. The higher the amount shows a strong commitment from the buyer to the sale of your home. If the buyer violates the terms, they could lose this money. Accepting a lower amount of earnest money is never recommended. A serious buyer is ready to commit and put down what they need to secure the home. Always talk this over with your real estate agent.
Appraisal Gap Guarantee Clause- Does the offer have an appraisal gap guarantee clause? This clause is a big deal as it states that the buyer has the money necessary to cover the gap, should there be any, between the appraised value and the agreed-upon sales price. Meaning the buyer will bring that ‘gap’ amount to the closing in cash.
A non-contingent offer is the best. Some contingencies may not meet your ultimate goals. Here are some of the contingencies buyers may include:
- Appraisal- In today’s market, some homes may not appraise low causing the lender not to finance the full amount of the sale. This doesn’t mean that your agent priced your home too high. The comparative market analysis was already done on your home. It just means that the market price and appraisal value are not coinciding.
- Home Inspections- If you’re a seller with an older home and deferred maintenance issues, the waiving of a home inspection may be a good thing for you, and more weight should be given to this offer.
- Financing- Is your buyer pre-approved or just pre-qualified? There is a big difference here and one that could cause a lot of headaches. If there is a financing contingency, your buyer does not have funds guaranteed to purchase the home.
- Another home to sell- This is another common contingency with home buyers. If they have another home to sell they may make their offer contingent on the sale of their current home. This could be another headache for you. Even the highest bid could leave you sitting in your house for a long time while the buyer tries to sell their own home.
- Lastly, how long do you need to close? Does the buyer need to be in at a certain date? Does it accommodate your schedule? Make sure to pay close attention to all the details.
Working with a professional real estate agent who is top-notch at reviewing offers and negotiating contracts is critical to your overall success. Yes, receiving top dollar for your home is at the top of the list, but knowing the ins and outs of the ramifications of contingencies and legal jargon are just as important and can impact you significantly.
This is what I do and what I love! I’m ready to assist you in selling your Beaufort area home and protecting your interests every step of the way. When you’re ready to make a move, let’s schedule a time to talk. I look forward to meeting you and helping you move on to your next home.