Bidding wars are inevitable. In today’s hot market, you need to be ready to compete with other buyers if you want to win the home of your dreams. But it’s important to not get too carried away in the process. Otherwise, you could end up offering more than you can afford. How can you best prepare yourself to win in this raging market? Here are 5 things to consider before entering a bidding war.
Know Your Boundaries
It’s easy to get caught up in a bidding war, but if you aren’t careful, you could stretch yourself too thin. You can avoid any issues by obtaining a pre-approval from a mortgage agent. A pre-approval will spell out the total amount that you qualify for based on the stress test. Then it’s wise to call a real estate lawyer who can calculate all the other costs involved so that you know exactly how much you can afford.
Have a Deposit Ready
At the time of offer, most sellers will want a deposit to secure the deal. In most cases, you’ll be expected to put 5% down, so make sure that you have the exact amount in your bank account before executing an offer.
Be Ready for Closing Costs
The deposit and down payment aren’t the only fees that go up when the purchase price does. You also have to consider the closing costs which can include land transfer taxes, legal fees, inspection fees, appraisal fees, title insurance, etc. If you sign an offer and don’t have the funds to cover all of the costs, the deal will fall through, and there may be some other repercussions. That’s why it’s important to have a lawyer look over all your documentation before you sign. A real estate lawyer will determine the closing costs that you can expect so there are no surprises.
The Offer Is Legally Binding
Purchasers need to understand that once an offer is fully executed, it is legally binding. Even if you have yet to submit the deposit, you are still contractually bound to do so. If you back out of a purchase, you can be sued for breach of contract. So before you sign, make sure you go over the offer with a real estate lawyer who can help you understand all of the terms, conditions, and responsibilities outlined in the contract.
There Is a Risk In Waiving Contingencies
Should you waive the condition of financing? Are you willing to forgo an inspection to beat out your competitors? The answer to these questions depends on many factors. Never waive contingencies before talking it over with your lawyer to determine if the risk is worth it.
Accord Law is here to help you navigate through the complex world of real estate. If you’re about to enter a bidding war, arm yourself with the expertise you need to get the proper advice and representation. Contact us today.