I’m smiling because I’m working with two sets of couples that are both first time home buyers and TODAY they both will find out if they were the highest and best offer on properties that they bid on. We’ve been working together since the beginning of 2009 (it’s now mid February) and we’ve looked through a great deal of houses that are for sale.
One of my couples made an offer on a short sale. We waited 30 days to find out if the bank would accept and we never heard anything. Due to their need to move out of their rental soon, they decided they would take on the foreclosure market.
Making an offer on a foreclosure can be a bitter sweet experience. You’ll most likely get a “yes” or “no” back faster (within a few days) but you’re also potentially competing with other buyers who want that fast answer and good deal as well. The banks and listing agent are smart too – they’ll list the house incredibly low, which will start a “bidding war,” where buyers will have to submit their highest and best offer.
A bidding war is kind of like an auction – but you don’t know what the other people are offering. Think in eBay terms – You find a good deal on a bicycle on eBay and you submit a bid of $xxx dollars. Well, low-and-behold, someone else comes along and bids above you! Now you have the option to stay in the game and outbid them until the time runs out. A bidding war for a house is similar but a little different in that you only get one chance to increase your offer or bid and you don’t know what the other bidders are offering.
When you’re in the midst of a bidding war and deciding whether to increase or stay put, I ask two questions:
- Can you afford a higher mortgage payment? How much would it increase your payment per month?
- Is this house worth the extra money to you?
For example, one of my couples bid on a house listed for $124,000. They wanted 3.50% back from the seller to cover their closing costs so they decided to make their initial offer at $130,000. We got lucky and the listing agent let us know that there was a bidding war and that our offer, as of that minute, seemed to be the strongest. But my buyers felt that the house was worth, to them, another $5,000, so they decided to increase their offer to $135,000.
And now we wait. I have two couples waiting to hear the good or sad news today and find out if they have won the war. If they don’t win, it isn’t the end of the world because right now many new foreclosures are hitting the market that they will have the opportunity to look at if need be.
As for short sales? They are still just as good a deal as foreclosures but, on average, they take 4 – 6 weeks to hear back as to whether your offer has been accepted. They are a good choice if you have some time to wait and you dread the fact of a bidding war. It’s not guaranteed that others won’t bid on them the same time you are, but it won’t be a frenzy like a foreclosure is.
Ready to start the process? Contact me!