How To Win a House Bidding War in Miami Florida (2021)
Want to buy a house in Miami or in South Florida?
Then you better get ready for a war in this market.
So you may have heard about how crazy and on fire the market is here, right?
Maybe you have heard about bidding wars or you have drive-by to a house with a big line outside with people waiting to see a property that is holding an Open House, right? Well sit down and get ready as I tell you with different examples of how you could win these battles in today’s market.
First of all, I need to say that you need to hire a knowledgeable realtor to your side; we are in a different market and you need someone who understands everything that is going on in today’s market. But Sharon how I know that? Simple, ask the right questions. You can interview that person and ask if that person counts with a team of professionals to recommend you as well.
Now let me give you different scenarios of two presented offers in today’s market so you can understand and learn a little about our market. Keep in mind that what sellers are getting are multiple offers on the table so you want your offer to stand out from the rest and by “stand out” I mean to present your best terms on the contract.
Let’s start with the example of a single-family home listed at $500,000.
1) Offer #1 – $500,000 offer received with a full DU letter from a local lender and
Offer #2– $510,000 offer received without pre-approval letter,
Who do you think the seller will select after evaluating the offers? Of course, the one with the pre-approval or DU document. The seller will feel that Offer #2 is not a serious Buyer. Also, in today’s market, a realtor letting you send an offer without getting you pre-approved should be a red flag for you. If you are a serious buyer, under any circumstances let your realtor send an offer without been pre-approved. Get a professional realtor.
Now I need to make myself clear with the following example but from another perspective.
2) Offer #1 – $510,000 received with pre-approval letter from a local lender
Offer #2– $515,000 received with pre-approval letter from a big bank
Who do you think the seller will select after evaluating the offers?
In this case, the Seller may ask their agent to help him/her with this. In most cases when the buyer is pre-approved with a big bank, the person from the bank who will initially be assisting the buyer will be out of state/city, meaning a change of time zone.
Having a person out of your area will be more difficult to communicate, will be harder. Second, since big banks are handling so many files at the same time you as a buyer and your agent may be dealing with different people during the process.
This is not convenient for you as a Buyer. On the other hand, if you work with a local lender you could absolutely avoid all of that. Including, if you are working with an excellent agent and you really like the property and you are in a multiple offer situation, your agent could contact your lender to let him/her know to immediately contact the listing agent and present themselves. That is a great strategy and a plus when you deal with a local lender. Having a local lender will definitely be more accessible throughout the transaction making the selling process for the seller easier.
3) Offer #1 – $510,000 received financed Buyer. Full pre-approved.
Offer #2– $520,000 received financed. Full pre-approved and contingent on selling another house.
Who do you think the seller will select after evaluating the offers? The seller will select offer #1 since it does not have any contingencies. In this scenario, it could be very risky for the seller the idea of having a contingency in the middle. Why? Because something could go wrong during the sale of your house. You do have other options so your offer could stand out and that is what you ultimately want. An example of this is to sell your house first and find a place to rent for a while until you find a house. I get it, it is not exciting. But at the end will give you more time to find the home that you want.
4) Offer #1 – $510,000 received financed Buyer, full pre-approved and 10 days inspection period.
Offer #2– $515,000 received financed Buyer, full pre-approved and 5 days inspection period.
Who do you think the seller will select after evaluating the offers? The seller will select offer #2 since it does have fewer days of inspection period.
Sellers want to sell. Having a longer inspection period will make waste the seller’s time. What the inspection period means is that the buyer could decide to back out from buying the house and get their deposit back in full. In that scenario again, the seller will waste time and money so they want to sell and to get the lesser time inspection possible so if something inspection-related goes wrong after the inspection period at least the seller could keep the deposit.
So yes, the sellers get concerned about getting a longer time frame inspection contingency. If you can make a short inspection contingency, the better. Anyways, you have enough time for you to schedule an appointment and the inspector will still be going to do all their work and get a report from them. Here I have to say and refer you again to my initial point about having a professional agent working on your side, reminding you of all your deadlines but having a team like working with other previous inspection companies gives you peace of mind.
5) Offer #1 – $520,000 received financed Buyers, full pre-approved, 5 days inspection period and appraisal contingency and buyers willing to put from their pocket up to $5,000 if the appraisal comes below purchase price.
Offer #2– $510,000 received financed Buyer, full pre-approved, 5 days inspection period, appraisal contingency waived.
Who do you think the seller will select after evaluating the offers? This one you could think could be a little tricky. The seller will select offer #2. Even though buyers are offering to put from their pocket X amount, Buyers in offer #2 are waiving the appraisal process. But Sharon, what mean for me as a buyer, to waive my appraisal contingency? That means that you have agreed to pay the difference from your pocket between the purchase price and what the house may appraise for if the report comes below the purchase price. Again, your realtor should make their homework getting you the comparables to give you a better idea.
6) Offer #1 – $510,000 received, cash Buyer contingent of selling their other home.
Offer #2– $520,000 received financed Buyer, full pre-approved, 5 days inspection period and appraisal contingency waived.
Who do you think the seller will select after evaluating the offers? This one is very tricky. Based on the terms of the contract and depending on what the seller thinks is less risky, the seller could select offer #2. Having a cash buyer is great but again, having someone waiving the appraisal contingency vs a buyer who still needs to sell their house could be riskier for the Seller.
Depending on the terms, of course, cash could win over other offers. Yes, the process could be easier and faster with cash.
However, as we saw, not always is going to win. Also, it really depends on what terms are going to work for the seller. So yeah the seller may surprise you by selecting your financed offer over a cash buyer.
Now, what other things you could do to stands out?
Remember, you just not competing only against one offer. Sellers are getting 10+ offers in most of the scenarios. Besides sending an offer as high as you possibly can, inspection period and/or waiving appraisal contingency of course that certainly takes you some of your protection, right? but if you are in a position that you can and have $10k, $15, $20k on your pocket to cover the difference to stand out, then by all means go ahead. Another thing is to offer the seller a concession of 1-2 months free rent, so the seller could find another place.
You could offer to close on a later closing date. Also, you can increase your initial deposit amount. If you still would like to do an inspection, you could let the seller know that you would like to have it however, will be for your knowledge only and won’t be asking for any repairs but at least you still be covered getting your deposit back if the report comes really bad.
So you can use any or all of those combinations, in fact, almost all offers are having almost all of what I just mentioned that is why it is so competitive right now but always do what you can and what you feel best to do. At the end, you are the person who will be living at the property.
I have to say to always listen to your realtor’s recommendations because your realtor is the expert who knows and understands the market.
Always be realistic and understand what is happening in our South Florida market right now. Listen, be open to strategies, be open to the idea that you will, in fact, be competing against a lot of people. Also, don’t get disappointed, at the beginning you may lose your first offers until you win the right one for you. Yes, you may have to send several offers on several homes before you get it.
When we talk about new communities, you won’t have a lot of competition. Of course, you will find that some developers are not offering the same incentives as before, that prices are increasing weekly (something like that), that they are controlling opening the lots, or that you need to wait more time until your house is built. But definitely, you won’t have that much competition, you could have more control. I will be doing a video of what the buyers are seeing in today’s market when dealing with new construction. I think this is a very interesting topic because again, this has changed. Now more than ever you need a realtor.
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Sharon Colón
Your Favorite Real Estate Agent in Miami
Home Miami Realtors
786-376-2398
[email protected]
www.sharoncolonre.com
