How to Close on a Chicago Luxury Home in a Bidding War

Picture this: You’re shopping for a home and finally find a property that is stunning, special and feels different from the rest. It’s perfect for you, and because you can picture yourself living in it already—well, it must be meant to be.

Odds are, you aren’t the only one who feels this way about that one special home. Because inventories on Chicago homes and condos are still fairly low, it is more the rule than the exception that a great home will go quickly, and buyers will find themselves in a multiple-offer situation with any home they bid on.

Because of this increased competition, I am working with my clients more than ever on how to stand out as a buyer. While it once might have been as simple as throwing more money into an offer, I find it important to explain the different approaches to overcome multiple bids.

The Power of a Real Estate Letter

One strategy that is becoming more commonplace for buyers is penning a letter directly to the seller of a home. Referred to as a cover letter or even a love letter, this more personal communication is said to increase a luxury buyer’s chances of having their offer accepted by 75%. This personal approach can go a long way, which I think speaks to the emotions that are often involved in real estate.

While it might seem to be all about the numbers—highest bid wins, right?—a letter plays into a less black-and-white approach. For one, it gives you the opportunity to stoke the ego of the seller with compliments of their beautiful home. It also shows that a buyer is serious and will be diligent throughout the sales process if anything should come up. And third, it shows that there is a real person behind all the paperwork, and can help the seller feel like they are leaving the home in good hands if that is important to them.

Ultimately, it’s ultimately up to the seller to choose an offer for any reasoning they like. So anything that a buyer can put out there to connect with the seller is a possibility, whether it be to tell them about their family, their work, or their connection to the home or neighborhood via a personal note.

Other Strategies for Purchasing with Multiple Offers

While a letter may be effective for some, real estate is a business after all, and many sellers are just as motivated by knowing that the transaction will go smoothly. The Wall St. Journal recently reported on the various tactics that buyers are using to make their bids more competitive, with more common approaches including:

All cash: Yes, it’s still king. And it’s not just more cash that seals a deal. Cash rules in real estate because, the lower the risk of a sale going through without issues, the greater the appeal of the offer will be to most sellers. Paying in cash ensures a seller that a deal will close, and will do so quickly. High-end sellers in particular tend to be less price sensitive and might take less money for the promise of an all-cash offer.

Escalation clause: This is an arrangement that automatically increases a buyer’s bid if a competing buyer bids higher. It’s like an upfront guarantee to the seller that they’ll get the very best price for their property.

Waiving inspection contingencies: This means the potential buyer cannot cancel or renegotiate the contract based on the results of a home inspection. Not only does this cut down on the time to close, it ensures the seller won’t hit any snags if the home inspection reveals anything that might make the buyer want to rework the terms of their offer.

Waiving financing contingencies: This means the potential buyer’s offer is not dependent on his or her ability to obtain financing. With the influx of all-cash offers, this is becoming less effective of a strategy for buyers, and in some areas might even be mandated for your offer to be considered.

Pre-inspection: This is when a potential buyer commissions an inspection before making an offer. This ensures the seller that the buyer is confident in the property upfront, and that the closing process won’t be held up by an inspection timeline or any issues that get brought up.

If you’re in the market for a Chicago home or condo, it’s important to walk through some of these strategies with your agent so you know exactly what you’re able to offer when you find that home you love. Transactions move quickly and competitively, and my 25+ years of experience can help you navigate some of the less-charted territory we’re seeing in the luxury market today and help you close a sale on a great Chicago home.

For information on purchasing a Chicago luxury home or to see what’s on the market now, contact me at (312) 498-5080 or email me at ssalnick@dreamtown.com.