Less inventory means more competition, but a few important tips can help a buyer come out on top in a bidding war for a hot property. NY1's Monica Brown filed the following report.
In a not-so-hot market, low inventory sometimes means heavy competition. Doug Perlson, the CEO of Real Direct.com, an online real estate brokerage, says buyers should know how to win a bidding war on a hot property.
"We're seeing a lot of competitive bidding on properties that you might not have seen a lot of competitive bidding on a year ago," Perlson says.
He says things like eliminating mortgage contingencies and moving quickly on the contract might be obvious. But Perlson says a buyer who wants to stand out from the pack should get creative and write the seller what is called a "love letter."
"It might be something personal. There might be a reason why you're a great fit for the property, the neighborhood or the building, and sometimes that resonates with the seller," says Perlson. "When there are multiple bidding situations and you have several people vying for a property and they look similar on paper, a love letter to the seller might actually make the difference."
The buyer should make sure his or her bank gives a pre-approval, not a pre-qualification. There is a difference, and the seller knows it.
"A pre-qualification doesn't actually look at all of your supporting documents. Pre-approval means that you have shown the bank all of your supporting documents and they know that you are going to be able to get that mortgage," Perlson says.
Speed is key, according to Perlson. If it is a competitive situation, the buyer will need to offer that magic number much faster, to avoid getting shut out of the deal entirely.
Keep in mind as well that some agents may exaggerate a bidding war, making a buyer think there are more players in the game than there actually are. That is why Perlson says it is crucial to do one's homework.
"Make sure you know your property and know its value to you. Just because you're getting caught up in a bidding war or a perceived bidding war doesn't mean you need to spend more than it's worth," says Perlson. "However, if a property is worth more to you for specific reasons, then it's probably worth a little more and it's okay to go up, assuming you can afford it."