How to Handle a Real Estate Bidding War

In northern New Jersey, the inventory of homes for sale has been relatively tight for several years, with more prospective buyers vying for homes on the market. That often means a bidding war, as home buyers attempt to be the one who gets the house they want.

Also driving this demand right now is the trend forecasted a couple of months ago (in the early weeks of the pandemic) and is now a reality—people are leaving the cities for more space in the suburbs. We’re seeing not only an increased number of people in our sales lead pipeline, but also where they are from—the majority being from congested urban areas outside of the suburban Essex County and Passaic County towns. These are well-qualified buyers, usually in their mid-30s and starting families. They are looking for homes across price ranges and they’re bringing large down payments to secure the home of their dreams.

That said, we’re seeing every property—whether single family or two-family (another popular property type right now) being bid upon by multiple buyers. Some properties are selling for $50,000 over asking price and, with tight inventory, many go to contract within a week, especially those that are priced right at market level and are professionally staged.

Here are some recommendations for buyers in a tight housing market, to engage smartly in a bidding war:

1 – Before you even go out to look at houses, get pre-approved for a mortgage. We cannot stress this enough. This is more rigorous than pre-qualification because the mortgage lender will run your credit, check your job information, and verify income. Based on that, the lender will tell you how much money the bank is prepared to lend you with a commitment to an actual amount (subject to appraisal).

2 – Make a larger-than-normal down payment. This shows you have serious intention of buying.

3 – Accelerate the time frame for making the second deposit after signing the contract (within 5 to 7 days instead of 10). As soon as the contract is signed, make that next payment!

4 – Accelerate the home inspection as well; get it done within one business week instead of two.

Advice to sellers
Before you put your house on the market, invest in cosmetic upgrades and basic repairs, like painting, refinishing floors or replacing old carpet, or replacing a tired-looking bathroom vanity. Fix what’s broken, clean out the attic, and organize the garage and the basement. Consider getting a pre-inspection so you’ll have a home inspector’s report on the major issues to take care of in advance.

Also invest in real estate staging to visually merchandise your home. A professionally staged home sells more quickly, and that more inviting interior may invite higher bids.

With a house that shows well and hungry buyers at your door, it’s tempting to accept the highest price; but at CENTURY 21 Cedarcrest Realty, we feel it’s more important to accept the strongest buyers (see list above). Terms are so important now, especially as people are dealing with the effects of the pandemic, with layoffs, furloughs, or reduced hours. You want to make sure the buyer can complete the contract process without issue. Your Cedarcrest Realty real estate agent, as your partner, can help you assess your buyer pool.

Contact us if you’re thinking of listing your home for sale in northern New Jersey, or if you’re looking for a great house that checks off all the boxes for you. We have two offices to serve you, in Caldwell (973) 228-1050 and Little Falls (973) 364-1111.

Tips for Winning a Bidding War

You don’t have to be a bidding man to win a bidding war. Even though the housing market has been slow to recover, many areas are seeing bidding wars on for-sale properties. In fact, it’s not uncommon for some areas to see 10-15 offers on homes the day they go on the market. Low mortgage rates and housing prices make it a good time to buy, and low inventory creates these bidding wars. To compete in these wars, you’ll need to be financially prepared to make the investment. You should also be familiar with the neighborhood and exactly what you’re looking for.

Here are a few helpful tips for winning a bidding war in today’s market.

Have Your Lending in Place

Too many buyers start working with lenders when they begin looking at homes. If you’re going to make a bid, you need to have your lending in place. Talk to lenders in advance and have a preapproval letter in hand before making a bid. This way, you’ll be more likely to win the war because financing is already in place.

Put Cash Aside

Financing is good, but so is cash. A down payment of at least 20% is ideal, but more cash is better. You want to show the sellers that you have the funds to close on the home, and the ability to make up the difference if the appraisal comes out low.

Make a Fast Offer

You can’t wait in today’s market. When you see a home you like, set up a time to view it as soon as possible. Not only should you make a fast offer, but also personalize it. You can talk to the realtor to determine what motivations the sellers need to close the deal and use this to your advantage. The goal is to make your offer look attractive compared to all the others.

Eliminate Contingencies

If you can, eliminate contingencies so that nothing slows down your offer. Common contingencies include financing, appraisals or home inspections. If you can’t waive these, at least find a way to shorten them. You want to make your offer strong and avoid having the sellers wait on things that may not come through. So, if you don’t need that home warranty after all, don’t ask for it.