There are a lot of myths that surround bidding wars, and that can keep buyers from getting the house they really want. If you’re committed to buying a house and you’re ready to proceed, you should be aware that bidding wars are always possible. Whether you end up in one will depend on the house you’re buying, because some are more popular than others. The location of the house may really affect your chances of getting into a bidding war, but the price, the amenities, the school district, and plenty of other factors can also play a role. Here are six myths about bidding wars to consider, so you’ll be prepared if you even find yourself in the middle of one.
1). I can change my mind, right?
Yes and no. Once you get into a bidding war, you’re competing against other buyers for the purchase of a house you all want to buy. If you’re being outbid and someone else has the high offer, you can change your mind about buying the house. That lets you walk away without any problem, because you weren’t under contract for the home. If you have the high bid and the seller accepts it, though, then you’re under contract. Changing your mind at that time could cost you big money, since contracts are legally binding. You want to be sure of how much you’re bidding and how much you really want the home, so you don’t end up making a big financial mistake that you can’t get out of.
2). Do I have to make my highest offer first?
In getting through a bidding war, you may make several offers. Start out at a price that you think is fair, and work your way up from that point. Some sellers will let a bidding war go on for a long time, and you don’t have any way to see what the other potential buyers are bidding. While you don’t have to make your first offer the absolute most you’ll pay, you certainly don’t want to come in with a low offer, either. Your agent can help you work through what might be the right amount, and you may also be asked for your “highest and best” offer as the process reaches a conclusion. At that point, you’ll want to make the highest offer that you’re comfortable with, and hope that it’s enough to get you the house.
3). Is it true that I need a home inspection before offering?
You don’t technically need to have a home inspection before you make an offer. However, a lot of buyers do that if they are concerned about a bidding war on the property. There are two reasons for this. First, they do it because that gives them a much better idea of the condition of the home, and they can use that information to make a better offer. Second, they have an inspection first so they can take the inspection contingency out of their contract. Without that contingency, the offer you make can look more attractive to the seller. A more attractive offer can mean a higher chance of being accepted, and moving forward with buying the home.
4). Can I see the offers of other bidders?
When you’re buying a house and you’re in a bidding war, you aren’t going to be able to see the amounts the other buyers are offering. If you could, you would just outbid the highest one by a dollar, and the house would be yours. Every buyer who bids is basing their bid on what they are willing to pay for the home, and to keep it fair no one knows what the others are bidding. Your agent may not even know what the other offers are, unless they’re both the listing and the selling agent. Focus your offer on what you feel the house is worth and what you’re willing to pay. Hopefully it will be enough to outbid the other buyers.
5). Don’t most houses have bidding wars?
No. Most houses have one offer, and then they go to closing. Some offers fall through, and then another offer comes along. A bidding war isn’t rare, exactly, but it’s not that common, either. Some areas of the country are more likely to have bidding wars for properties, just because so many people want to live there. If you live in an area like that, you could see a lot more opportunity for a bidding war than you would somewhere else. It’s good to be prepared for the possibility of a bidding war, but it’s really not that likely for most buyers.
6). If the price keeps rising, will the appraisal follow?
By working closely with your agent, you can have the best chance to be successful in a bidding war. Your agent can also help to advise you of whether you’re getting into the territory of paying too much. Even if the price of the house climbs very high, that doesn’t necessarily mean the appraisal will match the price. if the house won’t appraise at or above the purchase price and the seller won’t lower the price to match the appraised value, you may not be able to get your mortgage to go through. That could mean losing the house even after winning the bidding war, which can be very frustrating. Make sure your best offer is still a realistic one. There are always other houses.
2 Point Highlight
There are a lot of myths that surround bidding wars, and that can keep buyers from getting the house they really want.
By working closely with your agent, you can have the best chance to be successful in a bidding war.
