It’s no secret luxury homes, particularly in attractive markets like Edina real estate, are wildly sought after. A southwestern suburb of Minneapolis, Edina is home to lavish homes nestled amongst charming ponds and sprawling lush lawns, upscale shopping malls, and fine dining options galore. Edina homes for sale can attract so many eager buyers that it's not uncommon for these beauties to find themselves wrapped up in bidding wars.
As the home’s seller, this is certainly a blessing, though a bidding war can be tricky to navigate without a strong game plan. Your home is hot, catching the eyes of willing buyers. And you, the seller, hold a high degree of power in this bidding war. So, like anyone with a modicum of power, sellers must approach a bidding war with a strong understanding of their power and how to use it to their advantage. This article will review five insights and strategies to employ when your home is caught in a bidding war, and you’re ready to close the sale.
Consider an escalation clause for your real estate contract
When you have a prospective buyer who wants to make an offer on your house, one way to test the strength of their desire for your home is to include an escalation clause in your real estate contract. If you are new to this term, an escalation clause is essentially an agreement on behalf of potential buyers willing to make an offer on your home that they will automatically raise the amount of their offer by a certain percentage if any other prospective buyers bid a higher offer. This is an attractive agreement for prospective buyers as it offers them more security in closing a sale on your home.
Escalation clauses not only attract buyers who are more committed to buying your home, but they can save time on behalf of the seller by weeding out prospective buyers who are either not as committed to buying your home or can’t keep up with the escalating offers. It is not uncommon for homes to have escalation clauses in their real estate contracts, particularly for homes in competitive real estate markets like Edina’s.
Require proof of preapproval
When caught in a bidding war, it is important to make sure your prospective buyers can truly afford your home. There is a big difference between a mortgage pre-qualification versus a mortgage preapproval for your specific home.
When a prospective buyer has applied for mortgage approval from their bank, this is evidence of them being more serious about buying your home. On top of that, you’ll have insurance from the seller’s bank as proof that they can afford your home. This is an entirely reasonable thing to request of your prospective buyer, something serious buyers will be happy to provide.
Avoid raising your home’s price much higher than its appraisal
Because Edina homes for sale often generate multiple bidders, it can be all too easy for home sales to climb into the red zone of becoming noticeably higher than their appraised value. This isn’t always a bad thing. Some bidders may be so committed to your home that this may not be one of their greatest concerns. However, if your prospective buyer is involved with a lender, they will certainly care.
Raising the price of your home far beyond its appraised value can run the risk of losing a bidder or renegotiating your sale to a lower price. Never lose sight of your home's appraised value. It’s a good idea to establish a price cap for your home, no matter how exhilarating the rising prices of your home may feel when part of a bidding war.
Cash offers equal security for sellers
Though a prospective buyer may place the highest bid, this isn’t the same as receiving the highest down payment, especially if it’s in cash. High bidders may mean well, but if that bid is backed by a hefty mortgage, this means less security for you as the seller. If your prospective buyer makes a cash offer on your home, this is nothing to ignore. Cash offers demonstrate your buyer is entirely secure in their ability to purchase your home. When it comes to considering which of your bidders to keep, this may be one of the number one qualities to look for in a bidder. These bidders can surely close a sale on your home.
Which of your bidders can truly pay?
When prospective buyers are on the prowl for a dream home and come across one they can’t get out of their minds, some of them may begin to make offers that are well beyond what they can reasonably pay. A person can all too easily put their knowledge of potential consequences of the risk they’re willing to make out of their minds, even if these consequences far outweigh the potential gain they may be able to pull off.
As sellers, it’s important not to mistake a bidder’s enthusiasm and willingness to pay more for an actual ability to pull off a higher sale. However enthusiastic they may be about staying in the bidding war for your house, if they can’t pay, that dream is likely to pop at some point. If you don’t have adequate proof that your bidder can comfortably afford your home, it is best to save yourself time by dropping these bidders and reserving your pool of prospective buyers to ones who have demonstrated proof of their ability to pay for your home.
Partner with Stephanie Chandler Group
The Stephanie Chandler Group passionately serves Twin Cities, Minnetonka, and Edina real estate. Their team comprises more than 80 years of experience in mortgage, real estate, and title. Contact Stephanie today for a consultation.
