8 tips to win a bidding war.
In a seller’s market, when demand is high and inventory is low, buyers often have to go above and beyond to make sure their offer stands out from the competition. That, unfortunately, is increasingly becoming the case as of late. According to a Redfin survey in January, over 56% of buyers are facing bidding wars in their offers. And over two-thirds of offers written by Redfin agents in March faced multiple offers, according to a separate survey released in April.
While there’s no science behind winning a bidding war on a house, there are things that you can do to increase your chances. Here’s what you can do as a buyer in a seller’s market:
- Work with an experienced real estate agent.
- Be prepared and fully pre-approved.
- Explore a fully underwritten pre-approval.
- Raise your offer.
- Understand your options around contingencies.
- Button up your dates.
- DON’T write a personal letter.
- Know when to say “no.”
Work with an experienced real estate agent
The most important thing that you can do is work with a great real estate agent. You want to make sure that you work with someone that is an agent full time, understands the local market, and has the experience to help you make a strategic, winning offer. If you are already working with a Guaranteed Rate loan officer, ask them for a recommendation.
Be prepared and fully pre-approved
This should be absolute number one, and ideally completed before you even start looking at homes. Since sellers want offers that will not fall through, it’s imperative that you are fully pre-approved before making your offer. The pre-approval process can be completed simply and securely through our online application.
Explore a fully underwritten pre-approval
Pre-approval is a great first step and helps show sellers you’re a strong and qualified buyer. But what’s better than a pre-approval? A fully underwritten pre-approval. After completing the more extensive pre-approval process, buyers are able to make an offer that stands out from other financing offers and even help compete with potential cash buyers.
Raise your offer
There are several factors that play into who wins a house, but offering the most money for the house is a winning strategy, as most sellers want to receive the highest amount of money for their house. Before you increase your offer, there are a couple of steps you should take. First, talk to your Loan Officer about how upping your offer will impact your monthly mortgage payment. Second, consult with your real estate agent to make sure you’re not overpaying for a house. Your agent will be able to compare the house to home values and recent sales in the area.
Understand your options around contingencies
Contingencies are certain things that must be met in order to close a deal on a property. If they’re not met, the buyer is allowed to back out without losing any money. In a seller’s market, you’ll see an increase in waived contingencies, so as a buyer you should understand what these mean and talk to your real estate agent and lender to see if any of these make sense for the property you are buying.
A word of warning though: Waiving inspections can cause some serious financial headaches down the road, so only explore this option after speaking to your real estate agent. Also, see if there are creative ways to think about the problem. For example, if you’re thinking about waiving the inspection, get a pre-inspection done at the time of the open house.
Button up your dates
Find out what is important to the seller in terms of time frames. Some sellers want to close quickly. Others want more time. They may need to find another house themselves, or they may not be ready to pack up and move just yet. Have your real estate agent find out what time frames work best for the seller and tailor your offer to their needs.
Don't write a personal letter
The practice of writing a personal love letter to the seller of the property used to be suggested as a way to help strengthen an offer, the idea being that its appeals (perhaps accompanied by smiling photos of your family) would humanize an otherwise sterile offer letter. But the National Association of Realtors has recently increased calls to no longer follow this practice, as it can run afoul of fair housing standards and lead to unfair bias in the housing selection process.
Instead of penning a long missive to the seller, let the seller know how much you love the house through your agent.
Finally, know when to say "no"
If you’re a buyer, a final important strategy is to know when not to enter a bidding war. Have conversations with your partner, real estate agent, and loan officer about how high is too high to go, and stick to it. As any good card player will tell you, you need to know when to hold ‘em—and when to fold ‘em.
*Appraisal required for eligibility and subject to conditions.