In a hot real estate market, finding your dream home can be frustrating, no matter how many tools and websites you use. No sooner do you find a home you love, but you find out the seller already has multiple offers on it. If you aren’t ready to give up on your dream home without a fight, you’ll probably find yourself in a bidding war.
The key is winning the bidding war once you are in it. There are several tried and true strategies to succeed, such as offering above the asking price. But there are plenty of tactics outside of the box that could make all the difference in helping you go from bidder to winner.
If you’re in the process of buying a new home or hope to be soon, here are 20 tips to answer your questions and help you win a bidding war.
1. Find out how offers are being handled
Before you tour a property or seriously consider purchasing it, find out how offers will be handled. You can ask your real estate agent to do some advance research to find out if offers are being considered in the order they are received or if the seller will consider multiple offers at a time.
If a homeowner is determined to consider one offer at a time, you can have your real estate agent keep track of where you are in line while you move on to look at other homes. If the seller will look at multiple offers at once, you and your agent can strategize what approach you can make to stand out from the pack.
2. Come in with a high offer
There’s nothing like making a strong first impression, especially when a home is in high demand for potential buyers. Rather than get into a back-and-forth bidding war, you can come in strong by making an offer well above the asking price. That will let the seller know you are serious, and it can make your offer competitive before you even reach the negotiating table.
Before you make a mega-sized offer, be sure you are serious about this home, how much you are willing to pay for it, and if it is within your budget. If you are concerned about any of those points, it’s okay to walk away from a deal or to start with a smaller bid.
3. Increase your offer
If you have already made an offer on your dream home and find out there are other competitors, it may be time to increase your offer. Consult with your real estate agent to find out what increments they suggest to make your offer more appealing than others.
A top-notch real estate agent can also give you advice on how much of an increase is too much. Most of us aren’t able to walk into a home purchase with an unlimited budget. You only want to offer what you will be able to afford without risking defaulting on your loans.
4. Put more money down
To secure a mortgage, most buyers are expected to put down a percentage of the home’s total cost. Although this amount can vary depending on your circumstances, the more you put down upfront, the better. A bigger down payment means you will not need to borrow as much money from a lender. This can come in handy if a bidding war on a home goes beyond what most mortgage companies would be willing to pay based on a home’s appraisal.
5. Get pre-approved for a mortgage
One of the best ways to set yourself apart from other buyers is to get pre-approved for a mortgage. Having pre-approval streamlines the whole purchasing process and gives the seller more security. They will not have to worry about your offer falling through later because the financing didn’t come through.
Even if you don’t anticipate a bidding war, having pre-approval from a mortgage lender will let you know your maximum budget for a new home. Make sure you are pre-approved, and not just pre-qualified. Pre-approval comes with a guarantee letter from your lender while pre-qualified is less official and is subject to change.
6. Pay in cash
Paying for cash may not be an option for everyone, but it is one you should seriously consider if you are able. By offering to pay the full offer in cash, you can avoid financing, which can delay the closing process and decrease the risk associated with buying a home — and sellers are always intrigued by buyers paying in cash.
7. Have your finances in order
Whether or not you are paying in cash or getting a mortgage, you can save yourself and the seller time by having a complete picture of your finances before you make an offer. Create a packet of information that shows your financial situation and prospects. Have all three of your credit scores available, assemble bank and retirement statements, as well as any other related finances that could help or hinder your offer.
Having this information available tells the seller you mean business. It will also remove any concern they might have that your offer could fall through during the closing process when most home deals go south because of a lack of financing. Both you and the seller will have more confidence in the deal if there aren’t any financial hurdles.
8. Offer an appraisal gap guarantee
Want to make yourself stand out to the seller by easing their stress? Consider offering an appraisal gap guarantee. An appraisal gap, also known as appraisal variance, is the difference between a home’s appraisal value and the purchasing offer. When a market is hot, chances are most homes will sell for more than they are appraised. Some lenders will not give a loan for more than a home’s appraisal. By offering an appraisal gap guarantee, you are telling the seller you will pay cash to cover the difference between the appraisal and sale value.
9. Pay the seller’s costs
In a traditional real estate deal, a seller is responsible for paying closing costs. The closing costs typically include title fees and real estate commissions (which can be negotiated), which average between 5% and 6% of the cost of the home. No rule says the seller has to pay these costs. You can offer to pay your share of the closing costs, which would be about 3%, or if you’re able, you can sweeten the pot by paying the selling agent’s commission too.
Consult with a local real estate expert to find out how much you might expect to pay in closing costs. In some cases, you may be able to negotiate the commission paid to both real estate agents, which could save you money.
10. Act fast with your offer
At some point in time or another, you’ve probably had someone suggest you “sleep on it” before deciding on a major decision. But sleeping on it isn’t always the best approach when it comes to buying a house, especially in a hot market. Instead, the saying “the early bird gets the worm” might be more applicable.
If you fall in love with a home while you are touring it, and it checks off all of your boxes, then you should consider making an offer immediately. Let your real estate agent know if you are willing to act quickly with your offer so they can draw one up the same day.
11. Be flexible with the closing date
In some cases, a seller will be eager to close on their home as soon as possible. That could mean signing the paperwork in as little as one to two weeks after making your offer. Having a speedy closing date will be particularly appealing to a home that has sat vacant or if the seller is looking to avoid paying two mortgages at the same time.
Though rare, some homeowners may want more time between putting their home up for sale and closing. If this is the case, you can make yourself a more appealing buyer if you can stay in your current residence or move into temporary lodging to give them more time.
12. Add an escalation clause to your offer
Want to save yourself the trouble of going back and forth with your offer? Try adding an escalation clause to your initial offer. Much like the bids in a silent auction, an escalation clause states that you are willing to increase your bid by a percentage above any new, higher bids the seller may receive. In your escalation clause, you can also stipulate the maximum amount you are willing to spend so you can bow out of a bidding war if it becomes too expensive for your budget. Not all sellers will allow an escalation clause, so be sure to have your realtor check before you make an offer.
13. Waive any financing contingencies
Most real estate offers come with contingencies. These typically include mortgage and appraisal contingencies. A strong offer that will stand out to a seller will come with zero contingencies. Before you make a zero-contingency offer, make sure you can honor the terms. That could mean going into your offer with pre-approval from a reliable mortgage lender. It could also mean having enough cash on hand that you can pay down the difference in the home’s appraisal value and the closing price.
14. Do your home inspection immediately
If a homeowner is looking to sell fast, you can speed up the process by having a home inspection done quickly. In your offer, tell the seller you are willing to do the inspection immediately. Rather than waiting for one to become available, which can draw out the time between making an offer and closing, have an inspector lined up before you make your offer. Ask your real estate agent for recommendations on someone who will provide a fast and reliable inspection to help you cut through red tape.
15. Remove home inspection contingencies
In addition to removing financial contingencies in your offer, you could also consider removing the home inspection contingency. Removing a home inspection contingency will tell the seller you are buying the home as-is. That means if anything comes up during the inspection — such as faulty plumbing, a bad roof or mold — you are on the hook for paying to make any repairs that may come up.
Check with a real estate agent to find out if they see any red flags before waiving the inspection contingency. Realtors have access to more information about a home’s history, and they can find out how long it has been since a home has had major repairs or if there are any reported concerns.
16. Skip the inspection
If you are completely in love with a home and its location — and you are willing to buy it no matter what — you can tell the seller you’re willing to skip a home inspection altogether.
Going this route comes with considerable risk. Make sure you have the money, skills or both to take care of these expenses before you waive them. This is especially important if you are looking at an older home, versus a new build, as these major repairs do not come cheap. Also, this may not be an option unless you are offering a full cash payment for the home. Most lenders will require an inspection as part of the terms of your mortgage.
17. Offer the buyer a gift or incentive
You’ve probably heard of a gift with purchase at some time. But what about giving a gift with a sale? Offering the seller a gift is a sure way to catch their attention.
Recently, some buyers have added all-expenses-paid vacations to the buyers as part of their bid. Moving is one of the most stressful experiences a person will face in their life, and having a vacation to look forward to at the end of it all could be just what they need. This approach is unorthodox, but it could end up saving you money in the long term while leaving all parties satisfied. Although an all-expenses-paid vacation is not realistic for many buyers to pay for, even a simple gift basket could go a long way.
18. Write a personal letter
Have you fallen head-over-heels for a home? Is it the place you imagine spending the next 50 years and building a life? Put that in a letter to the seller, which can be included with your offer. For many, selling a home is more than a financial transaction. It is leaving behind a beloved part of their life that they want to be cherished by the next homeowner. By telling the seller your story and how much the home will mean to you, you may just seal the deal without having to break the bank.
19. Know your limit
Sometimes, the key to winning is knowing when it is time to throw in the towel. Though it can be disappointing, or even heartbreaking, to lose out on a home, there are instances when it may be the best choice. Owning a home is one of the best long-term financial decisions you can make, but you must find a good balance in how much you will pay for the home and the return you will get on it. You do not want to end up depleting your savings account and paying so much in mortgage payments that you are unable to cover your other monthly expenses or emergencies.
Make sure you are working with a trusted real estate agent who will have your best interests in mind. They will help you decide when it’s time to move on to another property.
20. Consult with a real estate expert
Whatever approach you take in buying your home, you do not have to do it alone. Talk to a top-rated local real estate agent who can offer you advice about what will work best in your local market and what you can do to sweeten the pot.
At the same time, a good real estate agent will be honest with you. They’ll tell you when it is time to move on from one property that will meet all of your needs and give you the best value for your money.
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