The Condo Mania Team
News > How to Win a Condo Bidding War
published on 2020-06-27
You're looking at the most beautiful condo (that's in your price range) on the market. Wonderful view out of the sliding glass door, kitchen upgraded to the extreme, an included garage you had your heart set on, and in a community that is in a perfect location. Time to call your real estate agent (and condo expert) to see it and put in an offer.
But then your agent pops the happy bubble by saying "There are 3 offers on the property already and the seller is looking at all offers tonight. If you want to buy this condo, let's get the offer in now and make it over asking price."
Our team has had this situation happen several times in the last few months. There aren't enough sellers in the lower end price points to satisfy the buyer demand, especially in the popular areas, like Arcadia and Midtown Phoenix. But somebody has to win the bidding war - what can you do to make sure it's you? Here are some strategies that up your chances:
Sellers love cash offers, and they'll tend to pick a cash offer rather than a finance offer that may even be a few thousand higher. Why? Because once the inspection period is complete, there are no financing or appraisal issues that may cause the contract to cancel or the price to be lowered.
Many buyers can't pay cash for a real estate purchase, but before you dismiss the option, consider some more creative ways, like a home equity line of credit on your primary residence (for second home buyers), a family loan, or a temporary loan from your 401k (if allowed). Then after the purchase, you can re-finance. You'll need to plan ahead for some of these tactics though, and there is some risk involved.
WAIVE THE APPRAISAL CONTINGENCY
If you can't or won't pay cash, the next best strategy for a property that you may have to over-bid for is to drop the appraisal contingency. If you are financing the purchase, the lender will require an appraisal, and the Arizona contract states that if the property doesn't appraise for the contract price, the buyer has an opportunity to cancel the contract. But what often happens is that the seller ends up dropping the price. In a balanced market, that is advantageous for the buyer, but it is a negative for your offer in a bidding war.
If you do drop the appraisal contingency, be aware that if the property appraises for under the purchase price, you may need to contribute a larger downpayment. For example, if your $400,000 purchase price requires a 20% down payment ($80,000), your loan amount would be $320,000. If the property appraises for $397,000, the loan amount increases to $317,600 (80% of the appraised value) and your down payment increases to $82,400.
DROP ALL EXTRAORDINARY REQUESTS
Make your offer as clean as possible in order to compete well with other offers. Though we all want the seller to professionally clean the property before closing or have them leave the killer tv in the living room, this and other requests like it will give the seller just one more reason to say no.
We have other tricks up our sleeves, including having the earnest money go hard after the inspection or using an acceleration clause. But the most important way to win the bidding war is to offer a competitive price. As we are condo and townhome experts, we can help you determine what that offer price should be. Contact us before you see that perfect place, so we can get prepared!
Though not guaranteed, information and statistics in this article have been acquired from sources believed to be reliable.
Midtown Phoenix is centered around Central Avenue with a mixture of older townhomes, mid-century modern highrises and sleek new midrise condo buildings.
The Fair Housing Act prohibits discrimination in housing based on color, race, religion, national origin, sex, familial status, or disability.
Information Deemed Reliable But Not Guaranteed. The information being provided is for consumer's personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. This information, including square footage, while not guaranteed, has been acquired from sources believed to be reliable.
Last Updated: 2022-12-06 02:48:19