Bidding War: How to Win a Bidding War and Get a New Construction Home in Texas
Thousands of people have been migrating to Texas in the past few years. In fact, statistics from the U.S census data show that more than 559,000 people moved to Texas in 2019 alone, and the number is projected to increase in the coming years. This large influx of people has caused the demand for new construction homes to outpace supply, making bidding wars one of the only ways to get your dream home.
Bidding wars might appear pretty simple after all, you only need to bid above the asking price and outbid every other person, right? Wrong! This is not always the case. There are several strategies you must know and things you must prepare to win a bidding war.
In this article, we will discuss four proven strategies to win a bidding war and get the house you want.
How to Win a Bidding War: Follow These 4 Steps
A bidding war can take as long as weeks or as short as a few hours to conclude. The timeline will depend on several factors like the number of bidders, offers, and the seller’s discretion.
You should note that even when the house is still under construction or almost complete, a bidding war can ensue. However, having a few strategies in place can go a long way to help you win a bidding war regardless of how long the process takes.
Here are four proven strategies to outbid your competitors:
#1 Get Pre-approved
An all-cash transaction is oftentimes needed for a bidding war. But if you won’t be making an all-cash transaction, then be sure to get your loan pre-approved. Offers with preapproval letters show your financial capability, making sellers more confident about you and increasing your chances of winning the bid.
A pre-approved letter is usually from the lender or loan officer, indicating the type and amount of loan you qualify for. It is usually issued after your finances have been checked: income, debt, assets, and credit history. Once it is satisfactory to the loan officer, you get the letter with the stipulated amount you want.
#2 Make a Competitive Offer
When there are multiple bids on the table, one of the things that would make you stand out is offering more than the asking price. Sometimes, it may just require the addition of a few thousand dollars. Other times (which is usually the case for new construction homes), you might have to add tens of thousands of dollars to be considered.
What matters the most is being the first bidder to make that competitive offer since it gives you an edge over other bidders.
You could also submit higher earnest money deposits so the seller knows how serious you are about getting the home. While this move almost always drives the point home, you must speak to your agent to determine the maximum amount you can offer. Buyers typically make bad financial decisions by bidding emotionally; this is something you must avoid at all costs.
#3 Waive Some or All Contingencies
Contingencies are certain criteria that must exist before a buyer can close a deal on a property. For example, you could say you have made a “contingent” real estate contract with a seller if you agree to the seller’s asking price (provided the home inspection comes back clean).
For resale homes, it’s essential that you inspect every nook and cranny of the home to ensure there are no severe damages or extensive renovation needed in the home. However, in the case of new construction homes, there is almost always no need for extensive inspection. So minimizing (or possibly waiving) all the contingencies can strengthen your chances of winning the bid.
But if you’re worried about overpaying for the house, you can include an escalation clause in your offer. An escalation clause simply shows that you are willing to pay above any offer up your budget limit by some fixed amount.
#4 Write a Personal Note
A personal note can go alongside the offer for the house to the seller. Most sellers would embrace the idea of selling a new construction home to someone that would love the home as much as they would.
Surprisingly, a personal note or letter might do the trick and leave a lasting impression. Here you're trying to play the emotional card―pulling the heartstring of the seller. You try to be sentimental, talk about the values you might share in common such as family values, hobbies and key features in the house that aligns with your belief. These things should strike a chord, making the seller feel confident about leaving the house in your care.
Here are a few tips to help craft a good personal note:
- First, introduce yourself and your family.
- Highlight and talk about the specific features in the property that you love and already imagine sharing with your family.
- Talk about your offer, whether it's on the high side or low side.
However, this strategy can only work if you buy the property from a regular person, not an investor. An investor would most likely not be moved by this, especially if the investor is an analytical thinker rather than an emotional thinker. But there's no harm in trying.
Getting a New Home: NewHomesMate Can Help
Since we've established that the one thing that can stand in the way between you and the home of your dreams are other buyers, taking these steps can help a great deal. But remember, there’s much more to winning a bidding war than your price. A good real estate agent with a deep understanding of the neighborhood and relations with builders can help you make the right decisions and win the bidding war.
NewHomesMate is a leading platform helping people turn their new home buying experience into a safe, pleasant, and exciting journey. We have a team of new homes experts capable of helping you get better terms and options, allowing you to focus on the most important thing – living the way you and your family were dreaming.
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