Signs That You Should Walk away from a Bidding War

If you’ve found your dream home, you might be tempted to keep raising your bid to beat out another buyer. Taking things too far can backfire. You have to know when it makes sense to walk away.

The Numbers Just Keep Going Up

You might find yourself in a bidding war with one or more buyers determined to win. In that kind of situation, you have to be careful not to let your emotions cloud your judgment. Here are a few ways to avoid making a huge financial mistake:

• Before you place a bid, figure out what your limit is. Set a specific number and stick to it.

• Include an escalation clause in your purchase offer. It will keep raising your bid to beat another buyer, but only to a certain point. Setting a cap in advance can keep you from getting carried away and making an unreasonably high bid.

• Accept that you might not be able to win. You might be competing with someone who has access to a lot more capital than you do.

Bids Aren’t in Line with the Home’s Value

Sometimes buyers get so emotionally attached to the idea of owning a house that they offer a lot more than the property is worth. If you bid too high, you might win the bidding war but struggle later:

• A lender can refuse to give you a mortgage for more than the house is worth. You’ll have to figure out how to cover the difference yourself.

• If you get approved for a mortgage, it can have high monthly payments that strain your budget and leave you with little or no money to save or invest.

• You might have to work more to cover the cost of your mortgage and other home-related expenses and not have time to relax and enjoy your house.

Your Agent Advises You to Stop Raising Your Bid

A real estate agent understands the local real estate market and isn’t emotionally invested in a house the way you are. Your agent can look at the situation objectively and tell you if the numbers that are being thrown around aren’t in line with the house’s value.

If your agent urges you to walk away, take that advice seriously. It might not be what you want to hear, but it might be what you need to hear.

Learn More in the First-Time Homebuyer Masterclass

Choosing a real estate agent, finding the right house, placing a bid, getting a mortgage – it can seem overwhelming. The First-Time Homebuyer Masterclass breaks down each step in the homebuying process, explains important concepts, and points out common mistakes.

When you finish the course, you’ll receive a certificate of completion that you can share with your housing counseling agency, down payment assistance program, or lender. It might even cover the cost of the course. Enroll now.

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