Multiple Offers - Should I Be Part of A Bidding War?
Buying a resale home especially during a hot market is one of the most stressful endeavours that many home buyers have been faced with. In a "hot market" it seems as though listings can't keep up with the level of demand and as such what happens is a bidding war for a home. It's as if you don't have time to even blink or panic and poof, the home is SOLD.
In a potential multiple offer situation, it is not uncommon for the listing agent and the seller to have agreed to terms in the listing agreement that all offers will only be accepted on a certain date and ending at 11:59pm. Of course this strategy from the sellers perspective is to create demand for the home where the ultimate goal is to attract as many offers to the table as possible.
Gone are the days when a prospective buyer may have included a personal note with the offer to try to connect with the seller for purposes of confirming how much they want the house. Nowadays, especially in a hot market it seems like the bottom line is "highest offer with the least conditions attached".
If a prospective home buyer really loves a certain property, then a strategy could be to register their offer as soon as possible (prior to the acceptance date of offers on the listing) and this bully or pre-emptive offer may not even be considered. There are risks on both sides of the fence of registering an offer early versus waiting until the appropriate time period per listing agreement.
An experienced Real Estate Agent needs to communicate with the Listing Agent to understand exactly the process of how all offers will be accepted. The problem is that nothing is set in stone and the process is subject to change by the seller.
If being part of a bidding war is not an option, then the most important strategy to have is to align yourself with an experienced Real Estate Agent that knows how to face these situations and equally important is to "have a strategy".
A potential buyer of a home that knowingly agrees to enter a "bidding war" should have price limits set but also a backup plan regarding alternatives to "not winning the bidding war". These alternatives should include at least two other homes as part of the buying process. Another alternative is to look at homes that have a larger Days on Market (DOM) than average which clearly there is not as much of a demand for these homes so you do not subject yourself to this "bidding war". If and when the hot real estate market reverses itself, the purchaser that bought a home with a large DOM will surely not have paid over Listing Price (quite possibly underpaid). Also down the road, the same homebuyer may be able to buy the home (or similar) that was part of a "bidding war" for a better price due to a cooler real estate market.
Sometimes it is a blessing to not win a "bidding war".