You’ve been budgeting, saving for a down payment for your dream house and you’ve finally found it. The house has everything you want, from beautiful landscaping to an open kitchen and a spacious master bedroom that’s just waiting for you to call it “home.”
The problem is that other people are home buying, too.
As a buyer, you must be prepared to make a bid, often lower than the maximum amount you’ll be willing to spend. Sometimes, the first bid is accepted, but if another eager buyer puts a bid on the home, you must be prepared to enter a bidding war. Sound familiar?
Winning a bidding war can be difficult, but these tactics can help:
1. Increase Your Bid
Sellers want to maximize their profits, and one of the key ways to win a bidding war is to offer the highest price. One method is to do your research and find out what the home is truly worth. If you find that the house is worth 20% more than the list price, you may want to put in a bid that’s 5% or 10% higher than asking price.
Increasing your bid, especially to above asking price, will get the attention of the seller.
But it’s up to you to find what you think a “fair price” will be.
2. Let Go of Your Contingencies
Sellers want to do as little as possible and deal with as few contingencies as possible to sell their homes. What kind of contingencies am I talking about? Here are a few examples:
Having to wait for a buyer to sell their existing home in order to purchase a new home.
Unusual financing or working with a lender that is known to not close on time.
Repairs or improvements that do not relate to the structural integrity or health and safety of the home.
If you let go of these contingencies, or at least some of them, you may be closer to winning the bidding war.
3. Show Your Pre-Approval
Pre-approval is a major factor when placing a bid. If you can show the seller that you’re pre-approved, you have a higher chance of winning the bidding war. Buyers that do not have pre-approval are a higher risk that most sellers want to avoid.
4. Write a Letter
Sometimes, sellers have an ideal buyer in mind. Write a letter to the sellers. Show them that you’re friendly and describe how you would make their house your home. The more the seller can relate to you and sees that you would be a good fit for the home, the more likely they are to select your offer.
5. Pay Cash
If you can’t afford to pay cash, skip this tip. But if you can pay cash, it’s preferred, as sellers don’t have to be concerned with buyers receiving the actual financing that they need before the sale goes through.
6. Increase Your Deposit
Want to show the seller that you’re serious about buying the home? Increase the earnest money you’re willing to offer and consider making a portion or all of your deposit nonrefundable. The funds will be put towards your closing and down payment costs, and it shows sellers that you’re serious about buying their home.
Before submitting an offer on any property, it's always a good idea for a buyer's agent to contact the listing agent and see what kind of information they can obtain about the seller, their motivations and needs, their plans about where they're going next, or any information that we cannot get from the MLS. I've had situations where my buyer's offer wasn't necessarily the highest, but my client had the ability to offer the seller the most flexible lease back. The point is, if you're not asking those questions, you're limiting your ability to make the best offer. Be a communicator!
In closing, it's always helpful to remember that some buyers get very competitive during a bidding war and will offer more than the home is worth. Don’t let emotions get in the way of making a smart bid on the home you want to buy.