Lately, with inventories of homes decreasing and demand for them increasing, you can bank on a bidding war for a home good condition or location. A Buyer who has come in second place multiple times is extremely motivated to just win a home. The Seller is very happy with a higher sales price.
Here is how it might work. You may offer $500,000 to purchase a home with an escalation clause stating that you will outbid other offers by $5,000 up to a maximum $515,000. So if another buyer makes an offer of $505,000, your escalation clause kicks in and you now offer $510,000 for the home. If Buyer 3 offers $517,000, then according to your escalation clause you are out of the bidding, because the offers have gone over your $515,000 ceiling or cap. It is a good way for Buyers to be very competitive and not wildly over bid for a home.
The dynamics of the process vary a great deal based on:
How much experience both Real Estate Agents have
The one thing that affects both the Buyer and Seller is the Appraisal. The Appraisal and Financing Addendum is a part of most Northern Virginia Contracts. It is the great equalizer and independent of Buyer/Seller because the Appraisal is ordered by the Mortgage Adjuster to ensure they are not financing an over-valued property. If your winning escalation price for the home was $510.000 and the home appraised at $500,000 or $520,000. The Buyer may elect not to proceed with the Sale either because they can’t come up with the additional monies need to get to $520,000 (cash plus original loan) or because of a low appraisal and the Seller is not willing to negotiate the sale price down to the new appraised value. Usually this negotiation takes place and saves the day.
Moving to Northern Virginia
Dennis Bell and a lot of folks who have helped thousands to relocate.