Bidding wars are one of the annoying situations when you’re trying to buy a home. A bidding war may happen when there’s multiple buyers very interested in buying the same home listed for sale.
Sellers and listing agents love it because these are motivated buyers competing against each other. It is very similar to an auction, where the highest offer ends the war and one buyer gets to move-in while the others must continue their search.
Not surprisingly, a bidding war isn’t a process that most prospective home buyers look forward to subjecting themselves to. With that being said, buyers should still take the time to learn how to put themselves in the best possible position as the winner because bidding wars could take place in practically any market.
Plus, major metro areas in California, such as Irvine and Orange County, have more bidding wars than other cities. If you’re thinking about buying a home in Costa Mesa, Newport Beach, or Irvine, it’s a very smart strategy to know how to be ready for a highly desirable home that will receive multiple offers.
Despite the fact that Southern California markets have cooled down in the last year, there is still a good possibility that buyers may experience a bidding war. Irvine and South Orange County are highly desirable areas for schools, work, overall quality of life.
Quick Look at the Orange County Market
As of December 2019, Orange County has a median home value of roughly $733,900 according to Zillow. That figure actually represents an increase of 1% from the prior year.
It is predicted that Orange County will experience an increase in home values of about 1.6% following another 12 month period. During the 2013-2017 period when Orange County had double-digit price gains on an annual basis, buyers were bidding against each other for a home most of the time.
Glimpse of the Irvine Market
The Irvine real estate market currently has a median home value of about $864,493, as of January 2020. This represents a decline of 0.8% from the past year. However, the city of Irvine is forecasted to have homes rise approximately 0.5% in the next 12 month period.
If you’re looking to buy a home in Irvine, you should be well prepared if a bidding war takes place. The public schools, UC Irvine, and it being an employment hub are very attractive.
Tips for Success to Outbid other Buyers in Orange County
While the Orange County housing market has officially been in a cooling phase for about a year, buyers are still prone to very motivated buyers with strong offers in certain neighborhoods. One strategy – which makes logical sense – is to put in an offer with your highest price. If the seller counters your offer along with other buyers, simply respond by raising your offer price aggressively to the list price or slightly above.
The problem is sometimes even if you come out as the winner, just hours or days later it’s at a price that makes you a bit insecure. It feels like you paid a premium price simply due to other buyers. To deal with this issue, you may want to use a different method.
An additional method is to write a personal letter to the seller. Create a letter that clearly lets the seller know that owning a home in this particular neighborhood has been a goal of yours for a long time. Tell the seller what they should already know that the nearby park and schools are great for your young kids.
Also, if your job is positive for society let them know the commute time is shorter and it would be a perfect transaction. Another approach you can use is to remove any loan contingency periods. Oftentimes, the other buyers make an offer which includes a contingency on the appraisal value, loan terms, physical inspection, or selling their own existing home first.
Not surprisingly, sellers prefer to accept an offer from a buyer without a lot of stipulations. Therefore, you can improve your chances of getting an accepted offer by waiving some of the usual contingencies.
However, there are risks involved with this tactic because if you can’t secure financing or the appraisal comes in low. Your earnest money deposit is likely to be awarded to the seller if you cannot complete the transaction.
Last but not least, one more strategy you can use to beat out other buyers for a home in Irvine is to insert an escalation clause in your offer. How this works is you are promising to raise your offer above the competing offers by a certain percentage but only up to a maximum limit.
For example, if your offer is $875,000, you could have an escalation clause that is .50% above other offers and with a maximum bid price of $925,000.
An escalation clause can be a very helpful tool in situations where a bidding war may arise. It lets the seller know you have the funds to close and are extremely motivated to buy the property. This is precisely the kind of buyer they want to purchase their home no matter if the market is competitive or not.