Buying a Home: How to Win the Bidding War on the House of Your Dreams
Don’t let multiple bids and a competitive real estate market scare you. Use these tips to get the property you want.
The tides may be turning on real estate prices but it’s still a seller’s market: Nearly 25 percent of homes sold for more than asking price in 2017,1 and home price growth only slowed moderately in the latter half of 2018.2 There’s still a chance you may face some competition when you’re making an offer on a house.
How can you improve your chances of landing your dream home? Start by always putting your best offer forward. In addition, consider the tips below as you navigate the negotiation process.
1. If You Can’t Make an All-Cash Offer, Bid Above Asking Price
Cash offers are the fastest way to close a transaction, which is why sellers are so inclined to accept them. In fact, an all-cash offer improves a competitive offer’s chance of success by 97 percent (and even more so in the luxury market).1
If you rely on lending to purchase a home, consider offering above the asking price. Your real estate agent may even suggest an escalation clause that increases your offer up to a pre-determined limit once other offers surface.3
To ensure the seller knows your finances have been thoroughly vetted by a lender, be sure to provide a pre-approval letter with your offer.
2. Consider Waiving the Financing Contingency
Waiving the financing contingency increases your offer’s chance of success by 58 percent.1 This guarantees that you can pay for the home out of pocket if your lender falls through. Though this move can be risky, you can protect your finances by getting a fully underwritten loan pre-approval from your lender before you submit your bid. However, it’s important to note that this option is not available from all lenders.
3. Make a Case for Yourself with a Personal Letter
A personal letter from the buyer to the seller can improve a competitive offer’s chance of success by 52 percent during a bidding war.1 Make your letter compelling by1:
- Offering a brief biographical sketch of who you are
- Elaborating on what made you fall in love with the home or neighborhood
- Highlighting hobbies or interests you and the seller have in common
If a home has multiple bids, your letter helps the seller conceptualize who you are as a potential homeowner. This can be a significant advantage if the seller has a strong emotional attachment to the house.
4. Buy the Home in Its Current Condition
Most home offers include an inspection contingency where the buyer is allotted about a week to inspect the home. At that time, he or she can request repairs, accept the home as is, or walk away and retain their earnest money (the deposit the buyer gives the owner as a show of good faith). However, in a competitive market, agreeing to buy the home as is and waiving the inspection contingency is commonplace.1 This allows the seller to increase their net profit by not having to make costly repairs, and close on the sale quicker.3
You can still inspect the home if you use this strategy, but you will be responsible for the repairs and their cost.3 Check with your insurance company to confirm they will insure the property if significant repairs are needed due to existing issues.
5. Get the Inside Scoop from Your Agent
When you’re up against multiple offers, consider asking your agent to reach out to the sellers to better understand their expectations.3 That can help you create the most competitive offer within your means. For example, the sellers may be motivated to sell quickly if they’ve already purchased another property.
6. It’s Not Over Until It’s Over
If the seller accepts another offer, your agent should ask to be informed if the property goes back on the market.3 Real estate deals fall through for many reasons, so you may get a second shot at your dream home if your agent is proactive.
Remember to keep an open mind and don’t get discouraged if your first few offers in a hot market aren’t accepted. Finding the perfect house in the right location within your budget may take some time, but these strategies can help you stay competitive.
Ready to purchase your first home? Learn about the differences between condo and home insurance.
- Which Bidding War Strategies Are Most Effective?, Redfin, 2018.
- Why You Should Sell Your Home in 2019, US News and World Report, 2018.
- Fighting Multiple Offers on a House? Here’s How to Win, Realtor.com, 2017.