Bidding wars occur when there is a low supply of property listings combined with high demand from buyers. In today's hot markets across the country, bidding wars have become very common. Pricing your home competitively, or just slightly below market value or the closest competition, can easily invite a bidding war. While they can drive up the price, they are a little bit risky.
If the final sales price ends up higher than the homes appraised value, it could cause financing problems for the buyer. If the buyer applies for financing, the home must be appraised for what the lender is willing to loan on the property. If the home doesn't appraise for the offer amount, the deal could fall apart. There are ways to still sell at the inflated price, but the buyer will usually have to bring more money to the table and then there's the fact that the buyer knows of the property isn't worth what they are paying for it.
If the deal falls through, it could jeopardize other offers. Buyers may wonder if there's something wrong with the house that resulted in the previous deal falling through. While it's something as simple as a bidding war, it may deter other buyers from even making an offer. The last thing you want is for your bidding war strategy to backfire.
In Miami, the difference between a seller's market and a buyers market literally changes from neighborhood to neighborhood. In higher-end neighborhoods, properties may not sell as quickly so bidding wars are not as common. In average or median home price neighborhoods, bidding wars are as hot as ever. So what should sellers do?
While bidding wars can be a good thing for sellers, undergoing one doesn't mean that there necessarily the end-all to sell the house. Sometimes, the seller is the one that becomes the casualty so it's important to understand several factors when it comes to getting multiple offers.
Don't automatically go for the highest offer.
It can be easy to want to go for the highest offer right away but the strongest offer is not necessarily determined by price. Price is important, but terms are important as well. You might have a buyer that is offering a high price without a financing contingency, letter of preapproval, or ridiculous terms, which, it doesn't matter what the prices, the terms are unfavorable. Make sure you understand all the details of an offer, not just the price.
Keep your emotions at bay.
Getting too personal can cause you to make errors in overpricing the home in the first place. Sure, you love your home, and you can't imagine why someone would love it as well, but try to keep your emotions out of the situation. Some homebuyers are getting emotional as well by writing letters to sellers enclosing photos of their family and explaining why they would be the perfect people to live in the home. While that might sound endearing, it may not be ideal to accept those offers. Sellers need to stay objective and judge each offer on merit only.
Don't let greed get in the way.
This can be one of the biggest mistakes sellers make. If you get bids over your asking price you may be tempted to counter offer for even more. I mean, if more people want the home, maybe the ones that really wanted will pay even more. But that's just getting greedy. Remember, the goal is to sell the house, not to fight for the highest price when you are already getting over asking price for the property.
The key is to go over every detail of an offer with your real estate agent. Because we understand the market we can help you make a wise decision having all of the information available to you.