How to Win a Bidding War in Massachusetts: Tips and Strategies

 

Picture of a boxer which represents bidding wars in real estate.Bidding wars when searching for Massachusetts real estate are commonplace. If your are searching for a new home in Massachusetts the chances you will experience one is highly likely. Discover effective tips and strategies to help you come out on top in a bidding war for real estate properties in Massachusetts. Learn how to navigate the competitive market and increase your chances of securing the winning bid.

 

Table Of Contents

 

Obtaining A Solid Preapproval Letter

When it comes to buying a home, nothing speaks louder than a solid pre-approval letter from a reputable lender. You can show sellers your financial readiness by updating your pre-approval letter and tailoring it to the property you're considering. Your preapproval should be up to date and dated the same day as your offer. It can be slightly older, but no more than 3 days is recommended.

 Partnering with a well-respected lender can enhance the credibility of your offer. The listing agent's confidence in a transaction increase when they recognize a reliable financial institution backing the buyer. Because of this, it is very important to Identify a lender who is proactive and well-regarded in the local market, one who will communicate directly with the seller's agent to assure them of your strong financial standing.

 

Consider obtaining an interim pre approval

A Picture of a lender and a buyer going over preapproval for a home.

Who appears as the lender on the preapproval letter can sometimes prove to be crucial when your offer is being considered. The seller confides in a listing agent to guide them through the selling process and the listing agent should have confidence in who the mortgage company is and the lender associated with it. A thorough listing agent will oftentimes call the lender. If your lender isn't savvy with the local market and agents in the market it could possibly hurt your chances in getting your offer accepted.

Consider using a local lender for your preapproval in the interim so that it may possibly help your offer get accepted. You might have a great relationship with the other lender and the great thing is you are not obligated to go with a particular lender just because you used their preapproval in getting your offer accepted. Buyers often rate shop and change lenders at various times during a transaction. You can always go back to your original lender. 

 

Obtaining a pre-commitment

A pre-commitment is a step beyond a pre-approval as it offers a full underwrite of a borrower's credit, income and assets for the loan product of choice. 

This maximizes the confidence and certainty of the seller regarding your ability to obtain financing. A pre-commitment eliminates stress for you and takes weeks off your purchase transaction by having the bulk of the mortgage process completed upfront. 

 

Consider waiving your financing contingency

The mortgage contingency in a real estate transaction is a clause that appears in the offer to purchase and inevitably the purchase and sale agreement. It allows you as the buyer to cancel the contract and reclaim your deposit if you are unable to secure a mortgage within the specified time frame (mortgage commitment date).

 This contingency protects you as the buyer, ensuring that you are not obligated to proceed with the purchase if you cannot obtain financing under the terms specified in the contract (such as interest rate, loan amount, and type of loan). If the buyer fails to secure financing by mortgage commitment date deadline and chooses to exercise the mortgage contingency clause, you can withdraw from the deal without penalty, thereby safeguarding your earnest money deposit.

Waiving your financing contingency can make your offer more attractive to sellers by signaling that you are a serious and prepared buyer. It indicates to the seller that you and your lender are confident in your financial stability and that you currently have or intend on having a fully underwritten mortgage pre-approval.

 Keep in mind that this decision carries significant risk because if you cannot secure financing by the closing date, you could lose your deposit and potentially face legal action. Only consider waiving this contingency if you are confident in your financial stability. It's crucial to understand the implications and ensure you have a backup plan in case financing falls through.

 

Consider Offering Appraisal Gap Coverage

Appraisal gap coverage is a provision used in a bidding war situation where the buyer agrees to cover any difference between the appraised value of the property and the purchase price. This strategy is often used in a competitive bidding war situation. It demonstrates your commitment and financial capability as the buyer to proceed with the purchase, even if the appraisal falls short of the agreed sale price. 

 

Consider A Larger Down Payment

A picture representing financial strength during a bidding war

Putting down a substantial amount demonstrates the buyer's commitment to the home while also enhancing the strength of your mortgage application. This speaks to the likelihood that your loan will be funded smoothly. It also lets sellers know that the buyer is financially secure and committed, making them a more attractive candidate for the property compared to offers that offer the minimum. If possible, tapping into savings or investments for a larger down payment could be a strategic move that pays off.

 

Consider Offering Above Asking Price

 In a competitive bidding war, offering above the asking price can be effective. It is important to analyze market trends and consider your budget before determining whether you can offer more. You may be able to put yourself ahead of your competitors in a bidding war scenario if you show the seller that you are serious and are willing to invest more into the purchase of your new home.

 

Include An Escalation Clause

An escalation clause is a strategic tool that automatically increases your offer in response to competing bids, up to a specified amount. It shows sellers that you're committed to being a top contender without immediately maxing out your budget. This clause can be the tipping point that nudges the seller in your favor during a close bidding war.

 

Make Your First Offer As Strong As You Are Comfortable Willing To Make It

Your initial offer is your chance to put your best face forward. You need to make a good first impression so it is important you set the tone with your goal in mind. Your goal is to possibly secure this home. Make your first offer one where you feel if you made this offer and lost in the bidding war process that you would feel fine and not have regretted maybe making the offer better. 

 

Consider Waiving Your Home Inspection

Waiving your home inspection contingency may appeal to sellers looking for a swift and hassle-free sale. However, this should be balanced with the risk involved. If you have concerns about completely waiving your home inspection, you could consider including a cap on potential repair costs you might assume instead.

By strategically reducing or waiving contingencies, you're demonstrating to the seller your commitment and confidence in the value of their home.

 

Consider A Pre-Home Inspection 

A picture of a home inspector inspecting a home during a home purchase.

In Massachusetts, a pre-home inspection is a professional examination of a property before making an offer, allowing potential buyers to assess the property's condition for any major issues or repairs. Buyers can use this proactive approach to gain valuable insight into a property's condition. 

Conducting a pre-home inspection indicates to the seller that you are very interested in purchasing their home. The fact that you are willing to pay for a home inspection before writing your offer will speak volumes to a seller.

It also could enable you to confidently waive the home inspection contingency or to utilize a much more aggressive cap on potential repair costs.  

 

Get Creative With The Home Inspection

There are times when you may feel that waiving the home inspection may not be an option for you. There are other options you can take by getting creative with the terms of your home inspection.

Consider making your home inspection for informational purposes. There is specific language that communicates this. Your agent will let you know how this could be worded and make applicable suggestions which relate to the current bidding war situation.

Previously we touched on placing a cap on potential repair costs. The technical term for this is an aggregate clause. This is another option that enables you to be creative with the home inspection contingency. 

 

Keep Contingency Time Frames Short

It may be necessary for a seller to sell quickly, for whatever reason. By streamlining the buying process, you can significantly strengthen your offer. By executing a fast purchase and sale agreement and conducting inspections immediately you can make your offer stand out as less risky for the seller.

 

Compose A Personal Letter 

It is common for sellers to want to do business with buyers they feel comfortable with.In general, people consider their homes to be among their most precious possessions, and they want you to treat the home with the same care they do.You can tug on the seller's heartstrings by writing a personal letter.You can highlight commonalities such as hobbies and other life experiences.Take a look at some of the seller's pictures, trophies, and memorabilia when visiting the home. If you have similar interests, you may be able to connect. Personal touches like these can make a positive impression on potential sellers.

 

Your letter should express your appreciation for the home. This strategy is typically effective when buying from an end user (non-investor). Typically, investors are more interested in the numbers and terms of the offer than they are in personal messages. Most of them are focused solely on their bottom line. If you are writing a letter, make sure it does not violate any federal or state fair housing laws.

If Possible Be Flexible On YoUr Closing Date

A picture representing being flexible on closing date during a bidding war. You can make your offer more attractive by understanding and accommodating the seller's specific requirements. The seller may need to sell their current home in conjunction with purchasing a new one or time their move with the start of their children's new school district. Whatever the reason, knowing a seller's specific needs, such as their preferred closing date, is crucial. If you are flexible with your closing date, you can align yourself with the seller's needs. In this way, you can demonstrate your commitment to the sale and respect for the seller's situation.

 

Offer More Flexibility With A Use And Occupancy Agreement ( U & O)

Providing sellers with the option to remain in the home post-closing can be an attractive proposition. This arrangement can be beneficial if you're not in a hurry to move in and can help seal the deal in a competitive market. Additionally, closing earlier under a lease-back agreement could secure you a more favorable interest rate. This flexibility can be an accommodating and strategic move, particularly for sellers who require additional time for the transition.

 

If Possible Consider Purchasing With Cash

During a bidding war, a buyer who pays cash can significantly strengthen his or her offer, since sellers often prefer a cash deal over mortgage financing potential delays and uncertainty. Transactions involving cash close faster, reducing the time and complexity of the sale process, which can be highly appealing to sellers looking to close their move as soon as possible. In a competitive multiple-offer situation or bidding war, a cash offer also bypasses the appraisal requirement. This prevents a common hurdle from derailment negotiations. Additionally, presenting a cash offer in a bidding war can differentiate a buyer from other potential bidders, increasing the likelihood of an offer being accepted.

 

What Does "Best & Final" Offer Mean?

When the seller requests the buyer's "best and final" offer, this means the seller does not want to engage in prolonged negotiations.

When a seller calls for "best and final," they are giving everyone a chance to submit their best offer. When there are several offers (i.e. two to five), this situation is common. They aren't using phrases like "highest". It is essential that you make the best offer you can, though you must compete if you want to have a chance of winning.

 

Strategies For A "Best & Final" Offer

A good strategy when a seller requests "best and final" offers is to include an escalation clause.Specify how much higher you will go over the highest offer.There are times when the seller stipulates that escalation clauses are not wanted.In this case, you will need to offer the highest number with the best terms you are comfortable with.Together with your agent, you will formulate the most competitive offer that is possible for you.

 

What Does "Highest & Best" Offer Mean?

When a seller calls for the "highest and best" offer, they are typically trying to create a frenzy, which in turn leads to a bidding war.The terminology alone conveys a psychological message to the buyer that you should be offering your top offer, with the best terms possible.After your offer is accepted, there is normally little room for negotiation.

Strategies For A "Highest And Best" Offer

In a highest and best situation, it is essential to submit your best price and terms.In order to accomplish this, your agent will have to do some homework.It is important to determine what the seller perceives as most important, aside from price, in a winning offer.The buyer's agent should always figure out what will get the deal done in these situations.During 'highest and best' negotiations, their agent should gather as much information as possible about the offers received so far.Until the offer is accepted, don't bring up any issues about the home.

 

Know How The Seller Will Handle Offers

If multiple offers are submitted, it's important to know how the seller's agent will handle them. Are they likely to ask all agents for their best and final offer, or will the buyer only be able to submit one offer? Or are they likely to ask all agents for their "highest and best" offers? Based on what you've learned about the two calls for offers in this article, you know there are certain tactics you will need to employ.

Certain circumstances may prevent you from submitting a second offer. When it comes to making an offer, the best one is often the first one you make. Knowing these things up front will be crucial for your agent.

 

Final Thoughts On How To Win A Bidding War in Massachusetts

You are now prepared to tackle competitive bidding wars with confidence after having covered the essentials. However, partnering with an experienced real estate agent is integral to securing your dream home. Such a partner elevates you above the average bidder to become a strong competitor, equipped not only with the goal of acquiring a home but also with the strategy to do it.

Through this collaboration, you will be able to create offers that connect with sellers, know when to increase your bid to demonstrate serious intent and make your offer so compelling that it stands out in a crowded market. Turn the complex world of bidding wars into a manageable journey toward your dream home by leveraging this knowledge and the support of a trusted professional. By working together, you will be able to make good, strategic decisions that ensure you find not just any home but the home that is uniquely right for you.

 

If you are ready to get out there and find your new home reach out to us to see how we can help you. Give us a call at 617-913-3237. 

Click here to book a buyer consultation

If you need to sell before you buy click here to book a listing consultation.

Visit our about page here