June 23, 2020
If you’ve been following Philly real estate in recent years, you know how competitive it has been to buy a home. Faced with tight listing inventory, strong demand, and rising prices, Philly home buyers have frequently encountered bidding wars. And that was before coronavirus.
Fast forward to today. Despite economic uncertainty in the wake of coronavirus, Philly homebuyers are seeing even more bidding wars than they did before. After several months of a severely depressed supply of new homes hitting the market, the inventory of listings is even more constrained and buyers are flocking to the same properties.
Not to worry though. In order to be ready for these bidding wars in Philly and increase your chances of success, the team from Prevu has outlined a few expert tips below to help you edge out the competition.
Buying a home is an emotional process that can be filled with excitement. However, when you add in competition, those emotions can get the best of you and lead you to get carried away during a bidding war.
While you always want to play to win with the strongest offer possible during a bidding war, especially if it is your dream home, you still want to make sure you operate within your max budget. Too often, buyers get so caught up in the instinctual desire to win that they risk overextending themselves.
Rely on your buyer’s agent to perform a comparable analysis to understand the fair value of the property. This way you have the data to be aggressive and disciplined at the same time.
“The financial benefit of a commission rebate gives buyers a competitive advantage in a bidding war,” notes Todd Hovanec, Prevu’s Director of Real Estate Services in Philadelphia. “For example, with Prevu’s Smart Buyer Rebate, you’ll receive a commission rebate of up to two-thirds of the commission Prevu receives for representing you as a buyer.
On a $600,000 Philly rowhome with a 6% commission - 3% paid to the listing broker and 3% to the buyer’s broker - Prevu’s will rebate up to 2% of the purchase price back to you. That’s an extra $12,000 you can use to boost your buying power.
To learn more about commission rebates, check out Prevu’s commission rebate guide.
One of the best ways to make yourself stand out from other buyers is to include a letter to the owner with your offer. A well-crafted letter gives you the opportunity to create a personal connection with the owner.
For example, maybe this is your first home, or maybe you are looking to start a family, or maybe you are moving back to your hometown and have roots in the neighborhood. Regardless of your story, these types of emotional appeals may swing the seller to choose your offer.
There is no doubt about it. Owners believe that all-cash offers provide greater certainty of a deal getting done. All-cash offers remove concerns about buyers not qualifying for a mortgage, and generally allow home sales to close quicker. If you have the capability to buy a home all-cash, it will give you an advantage.
If you can’t make an all-cash offer, which is the majority of homebuyers in America, an alternative way to strengthen your offer is to give a larger down payment (for example, 40% or 50% instead of just 10%). Putting more cash down reduces the size of the mortgage you are applying for and can reduce a seller’s fears of your mortgage getting approved compared to someone taking a larger mortgage.
While price is the most important factor in a bidding war, it is not the only lever you can pull as a buyer to make your offer seem attractive. Non-financial terms can also align with a seller’s situation. Flexibility on closing date is one example that will likely appeal to a seller who hasn’t yet found their next home.
Additional non-financial terms include waiving contingencies, such as a home inspection. While it is not recommended to skip an inspection, some buyers take this route to give them an advantage.