The NWM Blog
Written by Northwest Mortgage
Published on Fri, Jun 5, 2020, Last Updated on Fri, Jun 5, 2020
Congrats! You’ve found your dream home. All you got to do now is to make an offer and the home is yours. Wrong! You’re not the only one who thinks this is their dream home. You know want this calls for, right? A full-fledged bidding war!
A bidding war benefits the buyer because the offer on their home keeps going higher as the two parties try to outbid each other. You can avert the situation by not making the following mistakes, mistakes that could cost your dream home or force you to spend more than you intended.
Mistake #1: You Did Not Get a Pre-approved Mortgage Loan
You’ll want to determine your budget for buying a home using a mortgage calculator and then get a pre-approval mortgage loan. Most sellers prioritize homebuyers with a pre-approved letter, which states how soon they’ll have the money after closing.
Can I get a pre-qualified loan?
Yes, you can, but should you? No! A pre-qualified mortgage loan only tells the seller the estimated amount the lender is willing to lend you, the buyer. A pre-approval mortgage loan is better as it confirms the amount you can borrow to make the purchase. With a pre-qualified letter, there’s zero commitment, thus making a pre-approval loan a better option.
Mistake #2: You Bid the Entire Pre-approved Amount
Even though your lender has approved a certain amount you can use to buy a home, that doesn’t mean you should offer it all up front. In doing so, your credibility will take a hit. Bidding the entire pre-approved amount makes sellers and their agents nervous. Worse yet, you’ll lose all wiggle room for later negotiations. In the event the interest rate increases, the loan amount may not be enough to buy a home and you’ll have no choice but say goodbye to your dream home.
Mistake #3: You Didn’t Research the Market and the Seller
The price of the home shouldn’t be the only attractive selling point of the property. You need to do your research, looking through public records and real estate listings. Public records and real estate listings may reveal valuable information on why the seller has put the home on sale.
Knowing the seller’s motivations for putting their home on the market can help you make a good offer on the home for less money. You may also find clues on their motivations to sell their home on their social media account.
Their social medial may reveal common people and interests, which can help you negotiate a good deal. Whatever you do, don’t be a stalker. You’re only searching their social media for information regarding their home and why they’re moving.
For instance, you may find out that they haven’t found a new home yet, which means they may want to delay closing until they do. With this information in hand, you can create an offer that’ll entice them to say YES! You may also learn that they’re planning on moving due to rowdy neighbors or issues with an HOA (homeowners association). All of these things can be turned in your favor during negotiations. The information could also save you from buying into a home or situation that you wouldn’t want to be in either.
Mistake #4: You Submit a Lowball Offer
Don’t submit a lowball offer, as that’ll go nowhere and could cost you the home before negotiations could even begin. For example, if a house is valued at $350,000, don’t offer $300,000 for it, as the seller may take it as an insult and reject your offer.
Mistake #5: You Include Several Contingencies
Including too many contingencies on your offer can backfire, costing you your dream home to a less picky buyer. Most offers include a few basic contingencies. Contingencies are things that need to take place before closing can happen. That said, it is normal to put a contingency on a home inspection and how you can obtain financing within a certain timeframe.
Do you need help in securing a home? Are you a first-time homebuyer? If so, Northwest Mortgage can help. Contact us for information and guidance on how to secure a home loan.