In some real estate markets, the housing inventory is at historic lows. What this means to you, the home buyer, is that you may find yourself in a bidding war in one of these markets where demand is high on good-condition homes. Bidding wars can be extremely stressful for home buyers, so knowing a few tips on how to create a compelling offer that gets accepted is essential.

1. Ensure your finances are in order. If you’re going to need a mortgage loan to purchase your home, make sure your credit score is in good shape. At least four months before you begin the home buying process, check your credit reports and dispute any errors. Pay off any debts. Pay all bills on time. Don’t take out any new lines of credit.
2. Have at least a 20% down payment. Anything less will probably take you out of the running. Also provide documentation showing the source of your down payment and your financial information.
3. Get preapproved for your mortgage. Provide a preapproval letter with your offer. Contact Grandview Lending. Our senior mortgage specialists will guide you through the preapproval process to determine how much you can afford to pay on a home.
4. Gather your paperwork together. Keep a file folder containing your preapproval letter, recent bank statements, proof of where your down payment is coming from and any other documentation needed during the loan approval process.
5. Make your best offer. Become familiar with property values in your target neighborhoods. This knowledge along with your real estate agent’s recommendations on recent sales prices of comparable properties in the neighborhood will ensure you make the best possible offer on your dream home. If you try to play the negotiation game when you know the homeowner has received other offers, you may lose the home to another buyer.
6. Have a home inspection before you make an offer. Making an offer that’s contingent on a home inspection may weaken your bid, especially when other buys may waive an inspection contingency. Have a home inspector come with you when you’re looking at the property to satisfy any concerns about the home. Plus, you should always read all available disclosures and reports on the property.
7. Keep your contingency list short and reasonable. However, it’s not in your best interest to forego all contingencies. But try to keep your list as short as possible. You should never waive a home-inspection contingency, and that’s why doing it upfront during your viewing may save you time. A preapproval letter and a strong earnest money deposit can offset a financing contingency. But don’t waive an appraisal contingency unless you have the money to cover the gap between a low appraisal and your offer. For a stronger offer, don’t ask for a home warranty or help with closing costs if you don’t need them.
8. Include an escalation clause in your offer. An escalation clause allows you to increase your offer if the home seller receives a higher bid from another buyer. This addendum authorizes your real estate agent to make a specified higher offer above the highest bid the home seller receives. However, make sure you define a maximum amount that you are comfortable with and can afford to pay before you add an escalation clause to your offer.
9. Write a personal note to the sellers. Tell the sellers why you love the home so much and want to live there. It may influence their decision.
10. Meet the seller’s timetable to go to closing. If the sellers want to stay in the home after closing, offer them a rental agreement. However, make sure the sellers keep their homeowners insurance active while they’re still in the home. If the home is a short sell, ensure the seller that you can wait for the bank’s decision.

By knowing these tips beforehand, you can be more confident in making your best offer. And hopefully, you won’t be walking away from your dream home disappointed.

Photo credit: iStockphoto