Bidding wars have become quite common, especially in hot markets like downtown San Diego. While it’s normal to receive several offers on downtown San Diego condos, it’s possible for the offers to get competitive and launch a bidding war. To many sellers, nothing sounds better than a bidding war on their home, but multiple offers could put you in a difficult situation: choosing which offer is the best. Here are some tips for handling a bidding war on your condo and how to choose the right offer.
Don’t Automatically Go with the Highest Offer
It’s easy to get excited when you see multiple offers coming in, especially when offers come with escalation clauses that allow buyers to increase their offer above the highest bidder up to their cap price. You want to get the most money possible for your condo, but you should have other considerations. Keep in mind the buyer probably needs to get financing for the offer and may not be approved if he or she got carried away in a bidding war. Your home’s value also needs to justify the higher price or the buyer will need to find a way to pay for the difference. If the loan falls through, you’re back to the beginning. The highest offer may also come with contingencies you aren’t comfortable with. A lower offer may be more attractive if it’s in cash, backed by a preapproval, or closes sooner.
Watch for Contingencies
When multiple bids come in, you may have several offers that are fairly close to each other, and you may even have an offer far exceeding the other bids. Instead of relying on the price alone, go over each offer carefully and consider any contingencies. Some buyers may be requesting stipulations that make the transaction more difficult or time-consuming to close. Requiring that the home appraises for a certain amount, the buyer secures financing, or the home receives a satisfactory inspection are all common contingencies, but there may be more. A buyer may add a contingency to the offer that his or her current home sells first before buying your condo. The fewer contingencies, the stronger the offer. If a buyer waives the home inspection, it shows he or she really wants the home, and it removes a major roadblock to closing.
Don’t Be Greedy
Being greedy is a common mistake condo sellers make in a bidding war, and it can backfire. Sometimes when bids are close, a seller will request a second round of bidding or even a third round, which can push buyers past their comfort level and make them tired of jumping through hoops trying to get the home. Pushing buyers too far can make them walk away out of frustration. Giving all parties the chance to make their best and final offer when you receive multiple bids shortens the process and gives everyone a fair chance to offer the highest they are willing to pay.
Avoid Bringing Emotion into the Deal
As bidding wars become more common, it has also become common for buyers to write letters to sellers explaining how much they love the home and why it would be perfect for them. These “love letters” are designed to endear you to the buyers and encourage you to accept their offer, even if it’s not the highest or strongest offer on the table. Consider selling your home as the financial transaction it is. The best thing to do is stay objective, judge every offer purely on its merits, and avoid receiving letters from buyers.
If you’re planning to list real estate for sale in downtown San Diego, don’t begin the process without enlisting the help of a trusted local agent. Call 92101 Urban Living today at 619-649-0368 to find out how we can help.