Increasing the odds of winning a bidding war

Buying a house these days is tough. There are more buyers looking than there are homes on the market. As a result, there simply aren’t that many options to select from and when you find a house you like, chances are you aren’t the only buyer interested so you find yourself having to decide quickly whether you want to jump into a bidding war. While we are a bit biased, we think now more than ever buyers need to have a seasoned professional on their team to help them navigate the process.

Here are some of the tips we have been sharing with our buyer clients to increase the odds that they are the winners of a bidding war.

Sell your house/make the sale non-contingent You will be at a huge disadvantage if you make an offer contingent on selling your current home, so if at all possible, sell your home first (or have it under contract) before making an offer. The other option to explore is whether you can make an offer non-contingent on the sale of your existing property. The good news, in this hot market, is that when you list your home, it’s likely to be well received and go under contract quickly.

Pay cash We know this option is only available to a small number of buyers, but should your situation allow this, making a cash offer can really help your offer stand out. Cash offers by-pass the appraisal process that goes along with the mortgage application process and that takes the worry about appraising for the sale price off the table. Alternatively, a larger than normal down payment can help address the appraisal concern.

Waive inspections This one can be risky because, without an inspection contingency, you lose any opportunity to re-negotiate the contract price or ask for repairs to be completed. This is advisable ONLY if you are very confident in the integrity of the home, or have been able to ascertain that no major issues you cannot handle are present.

Raise inspection threshold Rather than using the standard $1500 for a single item threshold in a structural inspection contingency, consider raising that to a higher number. This will show the sellers that you aren’t gong to try re-negotiate for smaller items but will only be concerned if the inspection results in more expensive repairs.

Flexible closing date Depending on the seller’s situation, a faster or more delayed closing can be very appealing so offer flexibility if at all possible.

Escalation clause This tool enables buyers to offer over asking but reduces the risk of paying significantly more than the next highest offer. Rather than coming up with a flat number when asked for your “highest and best”, you start with an initial number and offer to beat a competing offer by X dollars up to a cap of Y amount. For a house listed at $300,000 you might offer $305,000 but add an escalation clause indicating that you will pay $1000 more than the highest offer up to a cap of $350,000. Therefore, if the highest offer is $315,000, you win the house for $316,000 but if the highest offer is $351,000 you would not be the winning bid. Some agents and sellers will not consider offers with escalation clauses, but if they are allowed, they can give you peace of mind that doesn’t exist in the true “highest and best” scenario.

Offer to pay difference between appraisal and purchase price If you think it’s possible the house will not appraise for the amount you are offering, you can stipulate that you will pay the difference between the appraisal and the purchase price at closing. This necessitates having cash on hand but can be helpful if you have a good savings, but not enough to pay all cash for the home.

Letters are out Due to fair housing concerns, love letters to sellers describing yourself and your family are generally off limits. Any letters or comments should be about the home’s attributes and your financial qualifications only.

Wait it out The current market for buyers is not sustainable and it’s inevitable the market will stabilize in the coming months as more listings come on the market. If you have flexibility, consider waiting it out. Moving to the area? Find a flexible rental. Outgrowing your home? Consider decluttering and tackling some projects you have been putting off. Both those tasks will help when it comes time to sell in the future.

As buyer agents, it is of paramount importance that even in a hot market, our clients are making sound and informed financial decisions. We provide the data you need to make the right offer for your situation and we do everything in our power to help you get the home of your dreams!