When the number of homes for sale in Silicon Valley is plentiful, buyers know they have multiple choices, and sellers have to get competitive to find a good buyer within a tighter market. When it’s the other way around – like it is now – the buyer must do all that is possible to present the kind of offer that will beat out the competition. If you’re considering buying a home in Silicon Valley, here are some strategies you should know.
Pay cash, if possible. Sellers like buyers with cash because they know the sale is more likely to go through without a problem.
Prepare ahead. If you won’t be purchasing a home with cash, it’s a good idea to closely check your credit reports about three months before you begin active home-shopping. The goal is to improve your credit score by disputing errors on the report and paying off as much of your overall debt as possible. Also during this period, spend time getting all your financial documentation in order.
Down payment. Accumulate at least 20 percent for this critical part of the deal, and try to accumulate much more, if possible. In a bidding war, an all-cash buyer or one with a larger down payment has a distinct advantage over the pool of buyers coming in with the accepted minimum of 20 percent.
Pre-approval. By getting pre-approved for a loan of a specific amount, sellers will know that your income and credit score have been verified and that you can afford the mortgage payments on the homes you’re looking at.
Minimize contingencies. Sellers would prefer that buyers bring no contingencies to the table, but usually that’s not a wise move for buyers. You’ll probably want a home inspection contingency and one that protects you should you need to back out of the deal. The key is to keep contingencies to a minimum.
Escalator clause. This clause can keep you from getting knocked out of a bidding war when someone places a bid higher than yours. You agree to automatically up your offer by a clear and specified dollar amount – and no more. This can work to your advantage if you’ve already developed a good relationship with the seller’s agent.
Make your best offer now. In a seller’s market, there’s no point in coming in with a low-ball offer. Remember – you’re competing with an untold number of other offers, so make your best one right out of the gate.
These are some of the steps smart buyers take when jumping into a bidding war. The bottom line is, you always want to make the deal as attractive and fool-proof as possible for the seller. There are more bidding war strategies, and I’ll be happy to share them with you. Call me at (650) 947-2942.
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