It looks like a dream come true when you find a house, and you feel like a home at first glance. The chances are, you can face many issues such as a bidding war, small down payment or may go over your budget. The bidding war makes buyers fall into the trap, and buyers spend huge money to get the house than its actual value. In this blog, we would discuss how you can avoid a bidding war and If you like the house and able to pay, how can you secure a home in a bidding war?
What is a bidding war?
A bidding war is when two or more potential buyers fight for ownership of a property by making incrementally higher bids due to demand and supply issues. When there is less inventory in the market, but demand for the house is more. For example, the buyer wants to spend $500,000; he would not go for a home listed for $599,000. He would look for the house in between $400,000-$500,000 range instead. If at the same time other buyers are also looking in same range and there are only few good properties this will lead to a bidding war among those buyers.
How does the seller create a bidding war?
The seller mainly lists his home at a lower price than the house’s actual value to create a bidding war. Consequently, this tactic spreads excitement among buyers who think the house worth more, but they can get it at a low price.
For instance, the seller knows the house worth $800,000 as the homes in that area are listed at $800,000. Therefore, to attract a large pool of buyers, the seller lists the house at $699,000. Potential buyers whose budget lies between $700,000-$800,000 would certainly pay attention to it. As a result, the seller attracts more hopeful buyers as he expects. In this process, the seller gets the benefit, ending up receiving more than the house worth. However, buyers who were excited that they can get this house at a low price get disappointed.
How to avoid a Bidding War?
Nowadays, most sellers use this marketing tool to attract many buyers. The strategy not to fall into this trap is to research that area and determine what price the sellers are listing their house? If every seller is listing at $800,000 or only one seller is listing at $699,000 then he is trying to create a bidding war.
How can you secure a house in a bidding war?
• Pre-approval- Getting pre-approved gives you the advantage to stick with your budget, and you have an idea how much you can spend on buying a house. Also, it shows the seller that you are serious about buying this house, and this step would undoubtedly outweigh other bidders.
• Invest time in Research- Visiting real estate websites to assess the market value of the house you want to buy can be a helpful way to determine how much other bidders can pay so that you can at least equal certain other offers and retain a competitive advantage.
• Create a marginally higher counteroffer than the asking price-Even if it is an unequal amount; if a house is for sale for $351,000 then do not underestimate the power of raising your bid to $357,000. Consistently deliver slightly more than the asking price if you are in a bidding war. This will differentiate your offer from the rest and give you an advantage.
• Allow contact with the property owner- You may be amazed to hear that a seller would consider your offer even though another bidder has made a higher offer because he knows you better. The strategy is to visit the house numerous times to develop a good connection with the seller.
• Do not fall into the trap of bidding war- When it comes to bidding war, people get excited, and they probably spend more money than they should not spend. The key is to pay attention to area’s crime rate, proximity to amenities such as schools, grocery stores, bus stands, etc. We recommend buyers research about that area, all listing houses or most crucial, consult with your real estate agent.
To sum up, the bidding war spreads excitement among buyers, ending up paying more for the house than worth. To avoid this, we would recommend buyers to do their due diligence such as research of that area, get pre-approved or consult with your Real Estate Agent. Pre-approval provides you with an advantage to make you look different from the crowd. The seller probably considers you as the substantial bidder, and you are actively looking for the house. We at MB Mortgages can help you to get pre-approved for the mortgage. Call us today at 905-458-6929/ 416-939-7131 for further information.
Why choose us-
As a leading Mortgage Brokerage, we have strong relations with multiple banks and numerous lenders. We work with Canada’s leading lenders to provide you a mortgage solution that fits your budget. Our mortgage and financing process is amazingly simple, we represent you and match you with the best suited mortgage as per your needs. This way we can guide you through this complicated process with our years of mortgage financing experience.
• We are dedicated and professional Accredited Mortgage Brokers in GTA.
• We are well trained and have experience in the mortgage financing field more than 10 years.
• We can shop around with different lenders to get you the best possible mortgage rates and conditions as well.
• We have different options for different income and credit level with access to number of private lenders to suit borrower’s needs.
We are a professional mortgage broker in GTA. We can help you secure a mortgage with best mortgage interest rates. We are located at 2896 Slough Street, Unit # 6, and Mississauga, ON L4T 1G3. Call MB Mortgages Inc. today at 905-458-6929/416-939-7131 for your queries or you can email us at: firstname.lastname@example.org or you can visit our website at www.mbmortgages.ca
The information provided in this blog post is intended to provide general information. You should consult with a mortgage professional to fully determine the scope of your situation. MB Mortgages shall not be held liable from usage of the information provided on this page. Individual situation may vary.