Avoid These Common Mistakes in Denver’s Real Estate Bidding Wars
There’s continuing good news for the Denver real estate market. The available homes for sale are at historically low inventory levels, according to the Denver Business Journal. And sale prices increased 11 percent in January from a year earlier, according to property analytics firm CoreLogic’s most recent home price index report.
It’s not a question of a housing recovery, but of a market so alive that there are growing reports of bidding wars. So, how do you put in an offer that will be accepted? How do you get the upper hand in a bidding war? Here are some home-buying tips to get you started:
Set the stage. Start by pinning down exactly how much you can afford before you start to look for a property. Your income, credit rating, monthly expenses, down payment and the interest rate will all determine your loan approval. Many experts suggest selecting a lender and a loan product, and then obtaining an approval letter (not just a pre-qualification letter) — all before you make an offer. To a seller, it can be tangible proof of your financial ability to close a transaction, and can bump you ahead of other buyers.
Don’t overpay. While it might seem logical that a seller would automatically accept the highest bid, this is not always the case. While price is important, sellers also want offers that are certain to go through (that’s why a pre-approval letter, above, makes sense). And, according to Ron Thorne, a real estate agent at Keller Williams Realty, overpaying for a house can be a risk: It may cause problems if the home does not appraise at the sale price, because lenders normally won’t fund loans in excess of the appraised value of a property.
Timing is everything. While slow and steady might win the race, it’s not going to win the bidding war for Denver real estate these days. When you’re competing against other potential buyers, it’s in your best interest to be on top of things and scan housing listings on a daily basis. Once you see a home on the market that sparks your interest, consider acting quickly. Delay a day or two and somebody else may already have the advantage.
Make your strongest offer. In a tight housing market, you can rightly assume there are going to be multiple offers on a property. Rather than going in with the mindset of negotiating to your final price, try going in with your strongest offer.
Package the offer. In competitive real estate markets, some buyers are minimizing the contingencies on their offer. And while it would likely be foolish to waive the home inspection contingency, there are things you can do to make the process easier on the sellers. For instance, you might agree not to have the sale contingent on the sale of your existing home (the risk, of course, is that you end up with two mortgages). You can also be flexible on the closing date, or perhaps even offer to cover some closing costs for the seller.
Successful home buying in a hot market is a result of good planning, financial preparedness and timing. But it can also come out of self-discipline, too. A bidding war can become an emotional experience, so having the restraint to avoid getting caught up in the drama can help ensure that you don’t end up paying more than you can actually afford.
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