How to Win a Real Estate Bidding War

house bidding war

If you’re trying to buy a home in a seller’s market, you’re going to find a lot of buyers and very few desirable homes. That means you’re going to face bidding wars. If you want to make a winning bid, you need to put yourself in the home seller’s shoes. What does the home seller want from your offer? What makes you more attractive to a seller? Follow the steps below to make yourself a strong contender in a housing bidding war.

Get a great agent.

Your real estate agent is going to be fighting for you on the front lines. Find someone who has experience dealing with multiple offers and whose judgement you can trust. Have them explain things clearly to you at every step. Most importantly: once you’ve found the right real estate agent, listen to your agent’s advice. Your agent will have a better understanding of the housing market in your preferred area and can more accurately assess the value of your home.

Put as much money down as possible.

You need to be able show that you have the funds to close. If possible, offer a down payment higher than 20%. Home sellers prefer to deal with homebuyers who can pay in cash. That way, they don’t have to worry about a buyer not receiving money in the event that you can’t get a mortgage. The more money you can put down, the more secure the home seller will feel.

Get preapproved for a mortgage.

Don’t wait until after you’ve made an offer to start looking for lenders— get preapproval on the mortgage.  Getting preapproved gives you an idea of what your future mortgage will look like based on your current financial standing. If you don’t get preapproved, the home seller has no way of knowing that you can afford the home (unless you’re buying with cash). Attend showings with a preapproval letter in hand to let the sellers know you’re serious about buying the home and are capable of paying for it.

Know the house market.

Know what’s going in the market where you’re planning to buy. How much are similar homes being listed for? How far above the asking price are they selling the home for? How fast are homes being sold? Have a conversation with your agent to avoid being blindsided and disappointed by market conditions.

Reduce or eliminate contingencies.

Contingencies are conditions that the seller has to meet in order for the sale to go through. A contingency you could abandon is the HOA rules contingency. This agreement states that if you aren’t comfortable with the conditions set by your Home Owners’ Association, then you can back out of the deal. Some contingencies, such as home inspection and mortgage availability contingencies, can be important. If you’re okay with painting your house a neighborhood-standard color instead of neon pink, you could probably ditch the HOA rules contingency. Talk to your agent about waiving any or all of your contingencies to make your offer more attractive to the seller.

Consider an Escalation Clause.

An Escalation Clause is an addendum to your offer stating that you are willing to increase your offer incrementally up to a certain limit if any other offers come in that match or top your initial bid. For example, say you offer a $300,000 bid with a $2,000 escalation up to $320,000. That means your initial offer is $300,000, but you’re willing to pay $2,000 more than the highest offer until the price reaches $320,000. After $320,000, you drop out. This shows the seller you’re serious and willing to go the extra mile to win the bid.

Be flexible with the closing date.

Again, put yourself in the seller’s shoes; this is especially true when it comes to closing the home deal.

If the seller still lives in the home, make your offer more attractive by offering them more time to move out. If the home is already vacant and the home seller wants to sell quickly, you can offer to close faster. Give the seller a closing time frame that they’re comfortable with.

Don’t give up if your bid isn’t picked.

Just because you’ve lost the battle, doesn’t mean you’ve lost the war. Have your real estate agent keep in touch with you about a home you’ve bid on if you’re still interested in it. If the winning buyer’s deal falls through, your offer can potentially be bumped up to first place.

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