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5 Tips To Win A Bidding War Against Competing Buyers
It is pretty much a seller’s market now. If you happen to scan through the classifieds and see a landed property listed at $1.5m, it will be sold by the time you call in to inquire for it. If a home owner dares to list his property available for sale, the odds are that there are buyers waiting in the wings ready to pounce. And who can challenge that? New launch condominiums are continuing to perform strongly, HDBs have hit the $1m mark, and home owners rather hold onto their properties instead of selling at just $10k over valuation these days. We can then sprinkle a topping of government policies that foresee a huge increase in population and the puzzle takes shape. Prices are heading in one direction unless something drastic happens.
Now home owners prefer to hold onto their extra properties instead of selling them. When an owner does put up his place for sale, he can expect at least 5 to 10 interested parties just on the first day of listing alone. So there is without doubt that you are going to get into one if you are buying from a home owner.
While you might intuitively think that being the highest bidder is the best way to emerge victorious in a bidding war, seller do not always decide to sell to the highest bidder. They will instead find bidders who have the best chances of following through on their bids and deliver on promises as the most preferred buyers. Here are 5 tips that will increase your chances of being the best buying candidate.
1) Approval in principle home loan. The biggest thing that can be holding you back from making a commitment to the seller is the worry of whether you are able to get the required financing for the purchase. Too many people only start looking for financing after making a purchase. Many do not even know that there is such a thing as pre-approved loan. You need to get your mortgage application done before you even begin to property hunt. You need know that your lender is ready to generate a concrete offer as soon as you pay the deposit and obtain the option-to-purchase.
If you have to, always keep a copy of your last 3 months of payslips in a ready folder. And slot in your latest income tax statement for good measure. Include any documents that you think will aid your loan approval. A pre-approval is always handy when you run into experienced sellers who have seen it all. Sellers who are selling high value properties will also be advised by their agents that buyers with pre-approvals are preferred as not many people are able to obtain big quantum loans from lenders. Just a small hint that you will have trouble obtaining the finances to complete the deal can persuade a seller not to take the risk of accepting your offer.
2) Proof of cash. If you are buying in cash or using a sizable cash upfront payment, you may want to keep a copy of statements proving your holdings. There are some instances where how much cash you hold can be a critical factor of whether you are able to see through with the purchase. One of them is when the property value comes back at way below the agreed transaction price. In such a scenario, since banks will offer you a loan-to-value based on the valuation, you will have to top up the difference in cash. A bulging bank account can sometimes give you an edge over other bidders when the seller is evaluating all offers. Just remember you have to fulfill all terms and deadlines finalize the deal.
3) Either be the first or last. The best way to emerge as the winner in a fierce bidding war is to avoid getting into one in the first place. Make it a point to visit the property in question on the first day that it gets listed. If your personal time is not that flexible, make your agent call up the seller and view the property in your place. If you are indeed the first buyer in the queue, use this opportunity to make an offer that is difficult to refuse. There is a social aspect of selling to consider as well. Starting with a low ball offer is just like telling the seller to wait for 10 more offers to come in before deciding on which one to accept.
If you only learned about an available apartment 5 days after it first got listed, it might be a good strategy to carefully position yourself as the last bidder. You do this by calling up the selling agent and give a convincing impression that you are going to make an offer and is reviewing your funding options. The selling agent will then advise the seller to wait for your offer to come in. While delaying your offer for a few days, use this time to talk to the selling agent to find out more about an acceptable price. Sometimes, it could be more effective to let your agent speak to the selling agent about this. In any case, if there are bidders in front of you that are putting in attractive bids, you won’t get a chance at the property anyway. So in such circumstance, playing out the last bidder strategy could be worthwhile.
4) Put your valuers on standby. How you estimate the value of a property is by referring to recent transactions in the vicinity and by getting an indicative valuation. You can actually get a decent estimate on property value by just providing basic information on the property. But as you would have it, sellers and their agents often paint a rosy picture of the conditions of the property. Only by physically viewing it yourself can you see the condition for real. Call up your valuers immediately and provide all the information you have to obtain a narrowed down value estimate. You need this figure to determine the offer you will put in. Often times, sellers are aware that their homes are not in the best of shapes. They may give in and accept your offer if you call them out on it
5) Delegate power to your agent. Speed is a key element of winning bidding wars. But you cannot be at all places at all times. If you are seriously eyeing a specific listing, consider giving your agent the authority to make bids on your behalf. You will of course communicate clearly what is your price ceiling and under what condition should he exercise that delegated authority.
It can be a painful experience to lose out on a property due to your unavailability. It will be even more painful to lose out to a price which you are prepared to outbid.