One common challenge that makes the home buying process stressful is the competition from other potential home buyers — especially here in the DFW market where the demand for homes has far exceeded the supply of homes for the past few years.
The big fish buyers target the shallow pool of properties available. If you don’t have enough money to match or beat their offer price, you’ll likely lose out. However, it’s all a matter of perspective, so let’s discuss why being outbid might actually be the best thing that can happen.
The beauty of being outbid
Once you’ve started your search and found “the perfect home” for you and your family, it can be really stressful to make an offer on a particular property. It can be frustrating and disheartening to find out that your offer wasn’t selected. My years of experience have proven that things always work out for a reason! (It’s super easy to say that AFTER the fact — after you’re already settled in the home that was meant to be yours. It doesn’t make the situation any easier, though, WHILE still in the process of finding and buying your home…..) Suppose you were outbid by a higher offer than the one you placed on a specific home — do not fret. There will always be another home that will provide you with the features you’re looking for at an appropriate price.
The money-saving opportunity
One thing about being outbid on a home is that you end up “practicing” the offer process and really scrutinizing your priorities and budget. Stick with your budget and try to avoid participating in a bidding war that could lead you well outside your comfortable range. This means that you could actually save money.
Factors to consider
A lot of potential homebuyers are very sad and frustrated when they can’t win the bid and be the owner of a specific property. It is all about being wise and using the right strategies and tips to avoid overspending on a home and stay on the safe side.
Here are some insights to help you before, during and after the home buying process:
• Determine your budget
Before you think of placing an offer on any home, you should again consider your budget and determine if you can afford to pay the price necessary to contract on that property. Given that many accepted offers are above list price and the appraisal value may be lower, it could require you to bring additional funds to closing. Are you prepared for that? The point here is to purchase what is within your reach, based on your current financial situation and possible future financial situations. By this time, you should already be mortgage-approved by a reputable lender and will know exactly what to expect to bring to closing and to pay each month during your ownership.
• Be ready to make a strong offer
As you are preparing to place an offer on a particular home, keep in mind that some offers can be rejected. I do recommend you be ready to make an offer — and make it strong — as soon as you see a house that’s right for you. The shorter the time period the home is on the market, the more closely to list price (or above) the house will contract for. If a house has been on the market for some time, there may be more flexibility on the price and less urgency to make the offer.
• Know when to stop
Understand what it is that makes the property so appealing to you and understand what it might cost to add such features to another house with a lower price tag. Set your budget and go into the process with back up houses in mind. Having a back up will allow you to stop at your limit with more ease.
• Consider going for a home that needs updating
When the bidding war is heating up on the top homes in the market, you can use this opportunity to look for homes that need a little updating or improving. Here, you will not only save money on the purchase, but you will have the chance to update the home to match your preference.
• Have a backup plan
Before you take part in a bidding war, you should always have a backup home (as mentioned earlier) that you will turn to if you are not the winning buyer. This helps save you time and spares you the stress of looking for a new home once your target home is gone. The backup home can be well within the price and area or in a different neighborhood all together. All in all, ensure that you know where to turn to after you lose in a bidding war.
It can be overwhelming to make an offer on a spectacular home. Always stay within our budget, no matter how elegant and attractive the target home seems. And, if you are not the winning buyer, be confident that there will be another home waiting to give you all the features you’re looking for at the price you want. Be sure to work with a trusted Realtor who can walk you competently and confidently through the home buying process.
My mantra for all offers on behalf of the buyers I represent: “This….. or something better!” (I secretly hope “This…” is “the one”!)
The above information regarding “Being Outbid on a Home Can Be a Good Thing” was provided by Nicole Smith with Briggs Freeman Sotheby’s International Realty. Nicole has over 20 years of experience helping families buy and sell homes in the Dallas/Fort Worth area. If you’re thinking of selling or buying, she’d love to share her knowledge and expertise.