The Philadelphia real estate market has been on fire since the Spring of 2020. There’s a shortage of homes for sale, most home buyers are facing bidding wars, and many homes are selling over the asking price. It’s common for home buyers to to face 5 or more competing offers. 10 to 20 offers on a home isn’t uncommon . . . and only one offer can win. To be competitive and get the house you’ll need to know all you can about how to win a bidding war when buying a house.
If you’re getting ready to buy in Philadelphia this year you’ll need to be prepared for bidding wars and know the best strategies and tips for how to win a bidding when buying a home in Philadelphia. Read on for tips on how to win a bidding war when buying a house from a Philadelphia Realtor®.
- Get in Early
- Don’t Hesitate
- Make Your First Offer Your Best Offer
- Keep Up with Coming Soon Listings
- Offer Over the Asking Price
- Find Out How Many Other Offers There Are
- Be Flexible on the Closing Date
- Use an Escalation Clause
- Non-Refundable Deposit
- Make a Minimum Inspection Cost Negotiation Limit
- Waive Inspections
- Appraisal-Proof Your Offer
- Write a Personal Letter to the Seller
- Write a Clean Offer
- Work with an Agent with a Great Reputation
- Work with a Local Lender
- Don’t Give Up
How to Win a Bidding When Buying a House
If you’re getting ready to buy in Philadelphia this year you’ll need to be prepared for bidding wars and know the best strategies and tips for how to win a bidding when buying a home in Philadelphia. Read on for tips for bidding wars when buying a home from a Philadelphia Realtor®.
Get in Early
In a strong seller’s market homes sell in days, sometimes in hours. I’ve seen offers come in sight-unseen within a few hours of homes going on the market and before anyone was able to get in for the first showing. You don’t have time to wait so make sure that you’re ready to go at a moment’s notice.
If you like the home and neighborhood then write your offer right away. Unfortunately, you’re not going to have a lot of time to hem and haw. If you love the house then it’s just about guaranteed that others will, too. It’s not uncommon to get 5-10 offers on a house in a day. I’ve seen homes with 20+ offers over the weekend. Sometimes just being the first to make an offer goes a long way.
Make Your First Offer Your Best Offer
Oftentimes sellers will want to wait a few days after their home goes on the market before making a decision. It’s fairly common that they will go back to all of the potential buyers and ask them to submit their “Best and Highest” offers by a certain day and time. But, sometimes they’ll just accept an offer right away simply to avoid having a weekend full of people walking through their home. Make your best offer right away and you just might get the house.
Keep Up with Coming Soon Listings
Coming Soon Listings in Philadelphia and the nearby suburbs are currently only available directly through the MLS, the database that real estate agents use to share listings with each other and their clients. You’ll find some Coming Soon Listings on sites like Zillow, but those are properties that will be listed as For Sale by Owner. It’s a small number of properties.
By keeping an eye out for Coming Soon properties you may be able to schedule a showing for the day that it hits the market.Your real estate agent can set you up with an automatic search for Coming Soon Listings. If you aren’t working with an agent and would like to get access to Coming Soon properties on the MLS send me an email at firstname.lastname@example.org and I’ll be happy to get you set up.
Offer Over the Asking Price
Unfortunately, it’s more likely than not that homes will sell for over the asking price in a hot seller’s market. That doesn’t mean that you’re paying too much for the house, it simply means that there is more demand for the home than anticipated at the asking price. It’s not easy to get asking prices right when prices are rapidly rising.
How much over the asking price should you pay? That depends on a lot factors. As a general rule the greater the number of competing the offers, the higher over the asking price you’ll need to offer.
Find Out How Many Other Offers There Are
In Pennsylvania the seller’s agent is required to make potential buyers and their agents aware of the existence of other offers if requested. However, the seller’s agent is not required to disclose any details of existing offers so don’t expect to find out about offer prices or other confidential details.
Be Flexible on the Closing Date
Many areas of Philadelphia, and the US as a whole, have very low inventory of homes for sale. This means that the seller may be having difficulty finding a place to move to after their home is sold.
If that’s the case then be sure that your agent makes the seller aware that you’re flexible on the settlement date if that’s the case. Most sellers expect to have to transfer ownership in 30-45 days but some may prefer 60-90 days or more. If you can accommodate this make sure they know it.
Use an Escalation Clause
An Escalation Clause is included with an offer and it states that you’ll be willing to pay a fixed amount above the next highest offer up to a certain limit. It also requires proof of that next competing offer. If your offer is for $400,000 with an escalation clause of $5,000 over the next competing offer you’ll pay $410,000 if the other offer is for $405,000. If the other offer is for $425,000 then that’s the highest you’ll pay.
When there are a lot of offers it’s most likely best to avoid the escalation clause and just offer the highest amount you’re willing to pay. It gets very confusing for sellers and their agents when they get 10 offers all with escalation clauses. Make it easy for them and you just might get the house.
A non-refundable deposit isn’t often used in Philadelphia, but it probably should be. Most offers will include a refundable deposit that gets returned to the buyer if they walk away from the purchase after inspections. In some parts of the country it’s common to include a portion of the deposit that isn’t refundable. For example, your total deposit may be $10,000 and you could make $5,000 non-refundable if you decide to terminate the purchase.
Make a Minimum Inspection Cost Negotiation Limit
Sellers don’t want to feel like they’re getting nickeled and dimed after the inspections and they don’t know what buyers will ask them to repair. This unknown causes them a lot of stress. One way to make an offer stronger in a seller’s market is to put it in writing that items estimated below a certain dollar amount to repair are non-negotiable. For example, maybe you’ll limit possible negotiation to items estimated at over $2500.
If you’re taking this approach be very careful with the language in the contract so everyone understands exactly how this will work. Be clear if you’re talking about individual items or if several items add up to the limit.
More home sales fall through during the inspection process than at any other time. Sellers don’t want to start from scratch and they don’t want to make repairs, especially when it’s a hot seller’s market. Waiving inspections is a way to make an extremely strong offer but, of course, that comes with major risks and shouldn’t be approached lightly.
While waiving inspections isn’t advised, it may be the only way to compete in some situations. I’ve seen numerous home sales with 5+ offers where the winning bid had waived inspections. It happens more and more in competitive markets and it’s hard to compete against an offer where inspections have been waived.
Appraisal-Proof Your Offer
If you’re getting a mortgage for your home purchase your lender will require an appraisal. The appraisal is an independent assessment of the value of the home. In markets where prices are quickly rising it’s common that appraisals come in below the agreed upon price. This can cause major problems.
You can avoid many of these problems by including an Appraisal Contingency with your offer. The contingency will detail what happens if the appraisal comes in low. For example, you may be willing to pay the difference between the appraised value and the sales price or pay $10,000 over the appraised value. Having these details spelled out when you make an offer can put the seller at ease and make your offer stand out above all of the others.
Write a Personal Letter to the Seller
A letter to the seller may make or break your offer when competing offers are very close. However, they can also backfire so approach them carefully. They may also be a landmine for fair housing and other legal issues so, again, be careful.
I’ve seen letters to the seller work in many situations. A letter can help to personalize an otherwise impersonal offer. The letter can also make a perceived connection between the seller and you. It may work wonderfully when someone is downsizing after raising their family in the home. They may see themselves in you if you’re a first time home buyer.
However, if the sellers are selling the house because of a divorce then maybe they’re not going to be especially responsive to the letter. Find out as much as possible about the sellers if you’re going to write a letter. The sellers agent is required to keep things confidential, including the reason for the move, so it likely won’t be much but it’s worth asking.
Write a Clean Offer
Make sure that your offer is clean, clear, and complete. Everything should be filled out completely and clearly so there are no questions. There are several other documents that will need to be included with your offer. Make sure that you have everything in order and complete. These additional documents include:
- Mortgage Pre-Approval Letter (or the Proof of Funds for Cash Offers)
- Seller’s Property Disclosure
- Lead Paint Addendum for Homes Built Before 1978
- Estimated Closing Costs
- Deposit Money Notice
- Additional Paperwork for Contingencies, Terms, and Conditions
Work with an Agent with a Great Reputation
Choosing your real estate agent is an important part of the home buying process. One very important thing to do is to make sure that the agent you choose has an excellent reputation in the area where you plan to buy your home.
Why does this matter? The fact is that some agents have a reputation of being difficult to work with. When there are multiple competing offers for a home the final decision may simply come down to which agent is easier to work with. I’ve certainly seen this happen many times. Be sure to choose someone who works well with others and has a reputation for professionalism.
Work with a Local Lender
Big national banks have a reputation in the real estate industry for making home purchases difficult. They tend have higher rates of pre-approved buyers who end up not qualifying for the loan at the last minute than reputable local lenders do. Also, like many large institutions, it can be hard to get in touch with the right person when problems arise. You don’t want to lose out on a house because of the lender’s reputation. Be sure to shop local and choose someone who knows the home purchase process in the Philadelphia area well.
Don’t Give Up
Losing out on homes that you fell in love with is disheartening. It’s terrible being the agent who has to deliver that message to their buying client, but it’s far worse to be the hopeful home buyer who didn’t win the house. When there are competing offers only one can win and get the house. It may take some time and you may need to make 2, 3, 5, or even 10 offers. Don’t give up! We don’t know if things will be easier for buyers next year or not. They could be harder. Write your best possible offer. Don’t get too disheartened if it takes some time.
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