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Buying a house can be a long, stressful, and drawn-out process. Part of that process is putting an offer, or bid, on the house. Regardless of what the list price is, you can offer the owner whatever you want; you can also add conditions to your offer, such as asking that lawn equipment or appliances remain with the house or requesting that certain repairs be done before closing.
Bidding can be incredibly tense because if you bid too low, chances are you won’t get the house. If you bid too high, you could find yourself at a huge financial disadvantage later. It’s important that you understand how to bid on a house, and how to do it effectively.
How to Bid on a House in the First Place
Obviously, you want to pay the lowest price possible and get the most for your money. Once you’ve found a home, your real estate agent will draft an offer in your name. The agent will go over the paperwork with you and may have advice about what requests you should make. Once you decide what you’re willing to pay for the house and any conditions you’d like to ask for, the agent will submit your purchase offer or bid to the seller.
Once the seller receives it, they can do one of three things. They can reject the bid outright, they can accept the bid as written, or they can send back a counteroffer. If they reject your bid, you can send over another offer, or you can just decide that’s not the house for you. If they counteroffer, you can go over what they’re proposing and see if it’s a compromise you can deal with. If they accept, great! You’re one step closer to homeownership.
How Much to Bid on a House?
The question of how much to bid on a house doesn’t have a cut-and-dried answer; there’s no magic formula. There are, however, a few tips to make sure you’re offering a fair price that the seller will be more inclined to accept.
First, do a comparative market analysis, or CMA. Your real estate agent can perform this for you; it’s a comparison of homes that have the same characteristics as the one you’re bidding on and are in the general area. Seeing what nearby homes have recently sold for can give you a much better idea of how to structure your bid—and whether the seller is overpricing or underpricing, as well.
You’ll want to pay attention to what the market is doing as well. If you’re looking at a popular new neighborhood in which everyone’s trying to buy but no one is selling, you’re probably going to pay more for a house there. The principles of supply and demand work in real estate, too. If you’re in a buyer’s market—when there are lots of houses available at good prices—you’ll be able to leverage that and possibly get your home for a bit less.
If it’s a seller’s market, where the home availability is low and there are more buyers than homes on the market—you might find yourself getting bids rejected because sellers know there’s another buyer who will pay what they’re asking.
How to Win a Bid on a House
You might not be the only buyer looking at a house—in fact, if it’s been advertised on the market, chances are you aren’t the only one bidding on it, either. Often sellers will entertain bids from multiple buyers in the hopes that the buyers engage in a bidding war and drive up the price of the home. In order to make sure that you’re the buyer coming out on top, there are a few things you can do when bidding on a house.
Make sure that you are preapproved before going to look at houses. Before bidding on a house, have your preapproval letter; if the seller accepts your bid, you can immediately get your lender to approve a loan for that specific property.
You should also expect to be putting down a sizeable down payment; sellers will often expect 20 percent down, as well as a solid earnest money deposit. In some urban areas, sellers may even look for a financial statement to accompany the offer.
Bidding on a house doesn’t have to be stressful, and it doesn’t need to drag out or be overly involved. With a bit of savvy planning and smart actions, you’ll be able to submit an offer on your dream home—and have it accepted by the seller.
Author: Jeff Gitlen