Bidding on a Home – Steps Home Buyers Should Take

So, you’re house hunting and have found the perfect first home to start your family, an attractive step-up property for your growing brood, or perhaps a smaller residence to downsize. So, now it’s time to start bidding on a home, but where do you start?

Regardless of your situation in life, there are three important steps in the bidding process you should complete before submitting what could be a winning bid on your new home.

Secure Your Financing with a Mortgage Preapproval

The first step is to prequalify yourself for a home mortgage loan, regardless of who you are borrowing from.

This home loan prequalification will give you an accurate idea of how much you can borrow and your monthly mortgage payment. And you will have all your paperwork ready to present to the Seller with your offer.

Plus, a preapproval letter to submit with your offer is a must in a competitive Seller’s market. When bidding on a home, Top Realtors won’t even submit an offer without, at minimum, a preapproval letter. Additionally, many check in with a lender to inquire about the status of a full prequalification and the strength of the home buyer/borrower.

Advantages of Prequalifying for a Mortgage

Prequalifying for a mortgage has several key advantages over other buyers who may not take this final step.

• Know your spending limits: Having a clear understanding of your spending limit lets you focus on homes within your budget and avoid unnecessary disappointment. Doing this is also a plus for the Buyer, not just the Seller.
• Gain a competitive edge: You will be in a stronger position than buyers who did not prequalify. Sellers are often more likely to negotiate with buyers with preapproved mortgages, viewing them as serious contenders.
• A better chance for success: Prequalifying for a mortgage reduces the amount of stress and uncertainty in the home-buying process for both parties.

With a clear financial picture, you can confidently bid on a home, help expedite the purchasing process, and give sellers a full prequalification, which they prefer over just a preapproval. There is a lot of risk for a Seller in selling their home, and this reduces the level of their anxiety during the process.

Understand the Housing Market

It’s essential to have a solid understanding of the real estate market in the area where you intend to buy.

This understanding is why it’s essential to work with a real estate agent. Your local Realtor will thoroughly understand the real estate market in the area you’re looking to purchase a home.

Your real estate agent will research recent sale prices of comparable homes and provide you with informative information about the area, including schools, entertainment, and other items you may find interesting. Also, your Realtor will provide information on the current number of homes on the market and any inventory shortages. Listen to your Realtor; they will explain all of this to help you make an offer that will at least be considered.

Hiring a real estate agent with expertise in the local housing market will help you make an informed decision on the local area and how much to bid for the property you’re interested in buying. Also, when bidding on a home, most Realtors will provide a range to bid and explain if they are aware of other offers on the property (having checked with the Seller’s Realtor up front). Additionally, multiple offers indicate interest from other buyers in the property, which can help determine how strong your offer may need to be.

How a Realtor Can Help When Buying a Home

Working with a realtor when buying a home is crucial for several reasons. Their wealth of knowledge and experience will help you effectively navigate home-buying in an ever-changing housing market.

• Finding your perfect home: A realtor will guide you in finding a home that checks all your boxes, from identifying potential properties to negotiating the best price and closing the deal.
• Realtors know the market: Your local Realtor will have access to recent real estate market data, which can help you make an informed decision about a property’s value and potential return on investment.
• Guide you through the buying process: A realtor will also help handle communications, arrange viewings, and navigate complex paperwork. All this helps ensure your best interests for a smooth closing.

The expertise and guidance a realtor can provide will make the home-buying experience smoother, more efficient, and more successful. It’s incredibly rewarding to help Buyers find their perfect home and secure it with a signed contract.

Making An Offer On a House – Negotiate the Best Deal

Don’t forget that you can negotiate items with the Seller. However, market conditions determine how successful you might be.

Always be reasonable with the Seller, but also realize that several items can be negotiated, and your results should be considered when deciding on what you’re willing to pay.

Common Items to Negotiate When Buying a Home

• Purchase price: This is usually the most significant negotiation point. Research the local market and recent sale prices of similar homes in the area to strengthen your position.
• Closing costs: These fees are associated with closing the sale. Buyers can sometimes negotiate with the Seller to cover some or all of these closing costs.
• Repairs: Should a home inspection reveal any issues, you can usually negotiate for the Seller to fix these problems as a condition of the sale or to lower the asking price to allow for the cost of repairs.
• Contingencies: These conditions must be met for the sale to go through, such as securing a mortgage or selling a current home. The terms and duration of these contingencies are negotiable.
• Home warranty: A home warranty can cover costs to repair or replace major home systems and appliances. You can ask the Seller to pay for a home warranty as part of the deal. This is also negotiable.
• Closing date: The timing of the closing can be an important factor depending on your circumstances, and it’s often something that can be negotiated. The norm is 30 days. Yet, sometimes, the Seller wants longer or a leaseback to meet a specific move date for them. Again, this is a negotiation.
• Personal property: Some buyers negotiate for certain personal property items, like appliances or furniture, to be included in the sale.

Final Thoughts

As we mentioned before, market conditions will affect all aspects of buying a home. If it’s a Buyer’s Market (lots of homes to choose from), you will likely have a stronger negotiating position.

However, in a competitive Seller’s market (where many buyers compete for a limited number of homes), it’s crucial to put your best offer forward immediately, as you may not get a second chance if you find yourself in a bidding war. Plus, always have a backup offer price ready if you get a chance to counter.

We hope you found this information helpful in preparing you to make that bid on your dream home!