Like many other areas of the U.S., the Washington D.C. real estate market continues to favor sellers with rising prices, low inventory, and plenty of interested buyers. If you’re looking at houses in Washington D.C., it’s likely that you will face competition when you find a home you love and make an offer. Not only are multiple offer scenarios common in a competitive market, but they can also lead to high-pressure bidding wars. A bidding war occurs when two or more interested buyers continually outbid each other in an effort to get their offer accepted. Though this can be a stressful situation, there are some ways you can get through it successfully to increase your chances of winning:
You can often stop a bidding war in its tracks by making your offer in cash. Sellers of houses in Washington D.C. know that cash offers are stronger than those that require financing. Not only do they show the financial stability of the buyer, but they can also close faster as there is less red tape involved. If you don’t have money in the bank to make a cash offer, you can try to obtain a different type of financing such as a private loan from a family member or colleague to come up with the cash you need.
If you can’t offer cash for houses in Washington D.C., the next best thing is to have a pre-approval letter in hand when you make your offer. A pre-approval letter states that you are already pre-approved for a mortgage up to a certain amount. In a competitive market, many sellers will not even consider an offer from a buyer who is not pre-approved. Fortunately, the process is relatively simple. Just visit the mortgage lender of your choice and show them proof of salary, employment, and assets. They will also check your credit history, score, and debt-to-income ratio as well as gather copies of documents like your driver’s license and Social Security number.
As a seller is evaluating competing offers, he or she will not only be looking for the highest price. The contingencies (or lack thereof) will also be taken into consideration. A contingency is a clause that protects the buyer. The more contingencies in an offer, the more chances there are for the deal to fall through. Common contingencies are those based on obtaining financing, selling a current residence, or the results of inspections or appraisals. Leaving these out of your offer can make it stronger, but it will also open you up to more risk. Talk with your Washington D.C. real estate agent about how you can mitigate your risk while still making your offer as appealing as possible.
You can put the bidding war process on autopilot when you write an escalation clause into your offer. An escalation clause states that you will increase your offer to beat higher bids up to a certain dollar amount. Not only do escalation clauses help facilitate and speed up the bidding war process, they can also help you to keep emotions in check and to prevent you from bidding outside your budget.
With homes in Washington D.C. prices increasing over 5% year to year, it’s not uncommon that an offer may end up being higher than what a home is appraised for. If you’ve included an appraisal contingency in your offer, you will be able to walk away from the deal if the appraisal comes back too low. However, if you did not include such a contingency and you still want to compete for the home, including an appraisal gap guarantee can give you a leg up on your competition. This clause states in advance that you will pay a fixed amount over the appraised value. If you do include this in your offer, you need to be prepared to cover the amount. If you don’t have it in cash, you can take out a short-term loan, borrow from your 401(k), or sell some assets to come up with the money.
Another way to gain traction and increase the chances of your offer being accepted is to have your agent communicate that you are willing to be flexible. This could mean agreeing to a shorter or longer closing period, being open to a leaseback agreement, or even offering to pay some of the seller’s commissions or title fees. Depending on their goals for selling, those with homes in Washington D.C. for sale may decide to choose a more flexible offer as it will best meet their needs.
Bidding wars can move quickly, and you and your Washington D.C. real estate agent need to be available to answer questions, put in competing bids, and respond to inquiries. Your agent should also be proactive and check in regularly with the seller or seller’s agent to monitor progress and make sure there is nothing you need to do to stay in the game.
The best way to increase your chances of winning a bidding war is to work with an experienced Washington D.C. real estate agent who routinely helps clients succeed in similar situations. When choosing an agent, ask them how they’ve handled bidding wars in the past and how many of their clients were able to clinch the bid.
Ready to start your search for homes in Washington D.C.? Reach out to one of the trusted local agents on the Center Circle GroupeThey can help you find the home of your dreams and be by your side should a bidding war occur.
Compass
1313 14th Street NW,
Washington, DC 20005
Center Circle Group
