Whether you should stay in a bidding war or pull out of it can be a hard decision to make. There are financial and emotional factors to consider, and you don’t want to make a costly mistake that you’ll end up really regretting. So, how do you know if you should pull out of a bidding war or stay in it? There are signs to look for that can help you make your decision. It’s important to talk to your real estate agent, as well, but you ultimately need to make the decision on your own. Here are seven areas to look at when you’re trying to decide whether you want to continue in a bidding war or pull out and look for another house.
1). Are you at the top of your budget?
If you’ve already bid on the house and you’re rapidly approaching the top of your budget, you may want to reconsider. The bidding could easily go beyond what you want to pay, and possibly even what you can pay based on how much your lender will loan you and the size of your down payment. It can be upsetting to see that you’re probably going to lose out on the house, but there will be other houses. They may even be a lot more affordable or suit your lifestyle better in some way. Keep that in mind, and don’t destroy your budget just because you’re in a competition. It’s really okay to let someone else win.
2). Is your down payment not going to be enough?
Even if you seem to be winning a bidding war, you have to consider whether proceeding is a smart move financially. Your budget may be all right based on how much you can borrow, but you also want to consider whether your down payment is going to be enough if the price of the home goes up. If you had 20% of the original offering price but not much else, it could be difficult for you to come up with more so that you can still have 20% down. It’s not as much of an issue if the price only rises by a few thousand dollars, but some bidding wars can drive up the price of an expensive home by tens of thousands of dollars.
3). Are you competing against some big-money buyers?
When you’re engaging in a bidding war, you won’t have any information on the other buyers. Some of them may have very deep pockets, or they may be able to borrow more than what your finances will allow. If you’re up against some buyers who just don’t seem to have any need to drop out or back off, it might be a competition that you’re not going to win. While your agent isn’t going to give you details on the buyers, they may be able to hint whether proceeding is a good idea or not. Keep an open mind regarding what your agent says, so you can make the right decision.
4). Does the house have some problems?
If there are some problems with the house, it may not be the one for you. Even if it’s a house you really like, you don’t want to pay top dollar and then still have to fix a lot of things. Rather than deal with that, it may be the right choice to pull out of the bidding war. You can always look for another home that costs less or that doesn’t need repair.
5). Are there other good houses in the area?
When you’re buying a new home, the location is very important. It can mean a better school district, more safety, a great view, or all sorts of other things. If there are other good homes in the area that are priced fairly, it may be time for you to let go of the one you’re bidding on and let someone else have it. Then you can find another one that’s also a great choice for your needs.
6). Is the seller asking for too many concessions?
Some sellers simply want too much for their homes, and that might not even be based on the asking price. They may expect to sell the house as is, or have other requirements for buyers. If a seller starts to get too particular with what they require from you, it may be time to move on. There are other homes with more agreeable sellers who won’t have as many concessions.
7). Would dropping your contingencies put you at significant risk?
If you don’t walk away from a bidding war that’s not going in your favor, you could end up frustrated and still lose the house you wanted. You could drop your concessions to try to make your offer more attractive, but that might raise your risk too much to be acceptable. If you drop your inspection contingency, for example, you won’t know if there are problems with the house until after closing. Dropping a financing contingency could also get you into trouble. If your financing falls through but your offer wasn’t contingent upon getting that loan, you may be sued if you can’t close on the deal. For a house where taking those kinds of risks is the only way you can win the bidding war, walking away can be a much better choice.
2 Point Highlight
If you don’t walk away from a bidding war that’s not going in your favor, you could end up frustrated and still lose the house you wanted.
Even if you seem to be winning a bidding war, you have to consider whether proceeding is a smart move financially.
