Youve finally settled on the house that you want. Now what? Bidding isnt necessarily something that comes naturally, even to those who have purchased a home before. Randomly guessing at what your opening bid should be is akin to buying a car at list price without checking under the hood you could end up overpaying or worse, never get in the running.
Step one, therefore, is to do your research. Look at house sales in that neighborhood over the last three months. You want to check specifically on houses similar in size and construction to the one you hope to buy. Compare the list price to the sales price on these homes. Note: if youre working with a real estate agent this person should be capable of furnishing this information. In fact, working with a professional who knows the area may prove to be the key to success. You want to know ahead of time if youre facing a bidding war.
So let's say that on average houses have been selling for about 5 percent under the listing price. Most experts would then tell you that your bid should begin between 8 and 10 percent under the list price so that you have room for negotiation. Having said that, if other people are bidding - this is a calculated risk.
There are other ways to help make your house bid successful. For one, get yourself pre-approved for a mortgage. When people have a lender lined up it makes you look far more viable than people who are only qualified for a loan. Additionally, have earnest money available. Beefing up the good faith deposit can often move your bid to the top of the pile.
Next, come in with a reasonable offer. While it might be tempting to low-ball it, even in a soft market youll only get the chance to raise your bid once, maybe twice at best. Make certain that your bid isnt overly complicated. The more contingencies you put on an offer, the more likely it is that youll loose out to another buyer who has fewer requirements. Having said that, knowing your limits and staying true to your personal needs is very important in home buying. Sometimes losing a bid is a blessing in disguise.
Finally flexibility is important in the bidding process. Be ready to negotiate and keep it reasonable. This isnt the time to nickel-and-dime the seller to death. Find a middle ground that makes both you and the seller comfortable and content with the outcome.
