We’ve all heard about bidding wars before. To hear real estate agents discuss them is like listening to veterans tell exciting wartime stories, or famous athletes reminisce on big games. But how do agents and sellers start bidding wars? Much of it has to do with the current condition of the real estate market, but there are plenty of other factors that come into play. Understanding how to start a bidding war on your Katy home could yield a tremendous financial benefit.
Five Things You Can Do
In order to start a bidding war, there is one prerequisite. Your local market has to be a seller’s market. In other words, there need to be more buyers than there are houses on the market. If the opposite is true, you’ll have a really hard time getting buyers to bid against one another.
With that being said, here are a few things you can do to increase your chances of hosting a bidding war:
- Price to Sell
The very first key is to price your home to sell. This means coming in at a fair market rate, or even undercutting yourself a bit and offering it for slightly lower than what the comps suggest.
Why would you price your house lower than it’s worth? Well, in a seller’s market, this strategy lures in buyers. They see the price, recognize that it’s a great deal, and then put in an offer. With multiple offers in hand, you can then come back and explain that you have five offers (or whatever the number may be). Because the buyers have already emotionally invested in the idea of living in the home, they’re willing to bid against each other until the price is higher than market value.
- Host a Broker Open House
“The more real estate agents who know your house is on the market, the more potential offers you can draw, potentially beginning a bidding war,” explains Donna Fuscaldo of Bankrate.com.
When agents visit an open house, they typically already have a few clients in mind. When they see that the property fits all of their buyer’s needs, they relay the message and word gets out. A broker-only open house can be a great way to launch a listing within the first few days of putting it on the market. If nothing else, it puts your house on the radar of the people who matter most.
- Explain What You Want
You’re obviously looking to get the highest offer you can, but that isn’t all that matters. When you have a bidding war, you get the opportunity to ask for other things. This means selecting a closing date, choosing between cash and financing, etc. Get your agent to explain to prospective buyers that you’re willing to entertain creative offers. This will get more buyers involved and could end up giving you exactly what you want.
- Set a Deadline
“If we have enough offer interest within 24 hours, there’s no reason to wait,” New York City real estate broker Ian Katz says. “But I like to set the deadline a few days after the first offers start coming in. This is done since buyers may want to come back for a second look or want to take a day or two to sweeten the offer by moving funds around or reapplying for financing.”
In other words, a deadline can crank up the pressure after you’ve received a number of offers in a short period of time. It tells buyers that you’re serious about getting the house under contract and don’t want to play games. This causes buyers and agents to think about their offers more strategically, as opposed to offering in anticipation of being countered.
- Work the Crowd
There’s nothing that increases the pressure for buyers more than knowing that other interested buyers exist. If you’re hosting an open house, invite friends and neighbors to swing through. This will create a steady stream of people, even if most of them aren’t interested in the home. If you’re scheduling showings, try overlapping them so that one potential buyer is entering when another is leaving. Little tricks like this can get people to put in offers much sooner.
How to Choose the Right Offer
Having a bidding war is great, but having more options ultimately puts you in the hot seat. Choosing the top bidder isn’t as easy as accepting the largest offer. There are some other considerations to think about.
- Cash Talks
Most buyers are going to be using some sort of bank financing to purchase a home. However, if you run across a buyer who’s offering cash, never underestimate the value of this sort of transaction.
“If you’ve got an offer that’s $5,000 more, but it’s from an out-of-state lender you’ve never heard of, those are shaky table legs,” realtor Andrew Sohn says. “If you’ve got someone with a cash offer, with no contingencies, but the price is a little lower, you might be wiser to take a lower offer.”
- Review All Concessions
Next, think about concessions in the offer. Some buyers will ask for money to apply towards closing costs, others want to close in 30 days, and others will want you to leave certain pieces of furniture that you were planning on keeping. All of these factors should play into your choice.
- Go With Your Gut
When it’s all said and done, you should go with your gut. That may mean choosing the highest offer, or it may mean choosing the lower offer with no contingencies and all cash. Think about the decision and trust your gut.
Green Residential: Katy’s Top Flat Rate Agency
At Green Residential, we’re proud to be Katy’s top flat rate realty company. When you work with us, you don’t have to pay the standard six percent commission that most agencies require. We operate on a much simpler fee structure and can save you thousands of dollars. If you’re interested in learning more, please contact us today!