The current housing market is considered a seller’s market as prices are high and there are surprisingly few homes for sale. If you are thinking about making an offer on an available home, do not float out an official bid until you have performed your due diligence. Asking questions is a major component of due diligence. Without further adieu, let’s take a look at five questions buyers should pose in a seller’s market.
Question #1: Which Contingencies, if any, are Absolutely Necessary?
Your purchase offer might be rejected if it has too many contingencies. Though it is perfectly acceptable to include common contingencies in a home offer, an excess of contingencies reduces the chances of acceptance. There is plenty of competition for available homes in this seller’s market so do not overload your offer with a litany of contingencies. If you have a contingency for the sale and transfer of title, your bid might not be accepted.
The bottom line is there will likely be one or several buyers looking for the home you have your sights set on who do not have to sell a home in order to buy another. Furthermore, it might even be a mistake to include a home inspection contingency. Though it makes sense to perform a home inspection, waiving this contingency makes it that much more likely that the seller will accept the offer.
Question #2: Will the Details of the Offer Remain Confidential?
If other bidders can see the details of your offer, landing the home you are targeting will prove that much more difficult. However, if the seller is willing to sign a confidentiality agreement, you can conceal the details of your offer from other interested parties. Such a confidentiality agreement also extends to the seller’s agent to boot. If the home seller decides it is best to have a group presentation of offers, you will be forced to either withdraw your offer or scrap the confidentiality agreement.
Question #3: What if There are Multiple Offers?
You might not know if there are several offers for the available property. However, the seller might notify you that several parties are interested or that several parties have already floated out offers. However, the seller must provide the agent with permission to reveal the other offers before the information can be shared with the buyer and/or his or her representative.
Question #4: If Our Offer is the Highest Will We Automatically win the Bidding War?
The highest offer does not always land the home yet it dramatically increases the chances of winning the bidding war when all is said and done. The home seller ultimately determines which offer is the best. It is possible another factor such as closing certainty or closing date flexibility will tip the scales in a certain bidder’s favor even though his or her bid might not be the highest.
Question #5: How can We Enhance Our Offer?
If you can make an all-cash offer, there is a much better chance of winning the bidding war. Furthermore, flexibility in terms of timing regarding the move-in date will also help. The elimination of contingencies, a willingness to cover closing costs and boosting the earnest money deposit will also improve your offer.