1. Offer the Highest Price.
This one is obvious.
The easiest way to win a bidding war in real estate or any situation is to outbid the competition. If you can pull together more money than the other offers, you will most likely be the top choice of the seller.
A higher offer usually holds a lot of weight when it comes to decision time. When it comes to bidding wars offering you must offer above the asking price.
It is not uncommon in many real estate markets for buyers to bid tens of thousands higher than the asking price. As a buyer bidding to win in this kind of market, it’s something you need to accept if you are serious about buying a home.
2. Implement an Escalation Clause
An escalation clause indicates that buyers are willing to increase their offer beyond the highest submitted sales price. This clause automatically raises the buyer’s bid without requiring changes to the existing contract. Typically, it includes a maximum escalation limit, ensuring your offer stays competitive during bidding wars.
Example: Homebuyer A offers $500,000 for a $490,000 home with an escalation clause of $3,000 above the highest bid.
If the house attracts 30 offers, and Buyer B’s highest bid is $550,000, Buyer A’s contract price escalates to $553,000.
While this method is common for outbidding rivals in a fiercely competitive market, use it only when you can afford the escalation. Escalation clauses offer the advantage of immediately positioning your bid at the forefront, but they can be manipulated by listing agents, potentially causing you to pay more than your initial offer.
3. Offer a More Substantial Earnest Money Deposit
Earnest money accompanies a sales contract to demonstrate the buyer’s sincere intention to purchase the property. It typically ranges from 2% to 5% of the sales price, with contingencies allowing its retrieval under certain circumstances.
Display strong commitment by offering an earnest money deposit exceeding the requested amount. You can also make your earnest money non-refundable, signifying your unwavering commitment to closing the deal. Such a tactic signals a high level of seriousness to the seller, placing your offer ahead of others that may be less determined.
4. Engage a Reputable Local Mortgage Lender
Listing agents routinely verify the mortgage lender and pre-approval letter. Opt for a reputable local lender to avoid potential deal-sabotaging issues associated with less reputable ones. In smaller cities, this becomes even more critical, as real estate professionals are more interconnected.
Rely on your REALTOR®’s advice to select the best lender to boost your offer’s strength. The reputation and experience of your Real Estate Broker and mortgage broker can significantly influence your contract’s competitiveness.
5. Offer to Cover the Seller’s Moving Costs
An uncommon but effective strategy is to offer financial assistance for the seller’s moving expenses. This approach is particularly appealing in situations where the contract price significantly exceeds the listing price, potentially leading to appraisal challenges.
By offering to cover moving expenses, you benefit the seller without affecting the home’s sales price. This sidesteps appraisal and mortgage hurdles, making it an attractive option for savvy sellers.
6. Avoid Personal Letters
Writing personal letters to sellers, once a common practice, is now discouraged due to potential fair-housing issues. These letters, intended to create an emotional connection between buyer and seller, have led to legal complications.
The National Association of REALTORS® advises against including personal information about buyers in offers. Most listing agents avoid presenting personal letters to their clients in today’s legal environment.
7. Be the First to View and Submit an Offer
Some sellers prefer swift transactions with fewer offers to consider. To seize this opportunity, work closely with a proactive REALTOR® who can promptly schedule showings upon new listings. Act swiftly to submit your offer when a promising property surfaces.
8. Cover All Title Insurance Fees
While it’s customary for sellers to pay for buyers’ title insurance in many states, offering to shoulder this expense can set your offer apart. Title fees typically range from $500 to $1,500, varying by state.
9. Waive the Inspection Contingency
Waiving the home inspection contingency is a bold but potentially effective move. It involves thorough research and comes with risks, but it can strengthen your offer significantly.
10. Remove the Financing Contingency
In highly competitive markets, waiving financing contingencies can ease sellers’ concerns. It shows your commitment and willingness to proceed even if financing hurdles arise.
11. Increase Your Down Payment
A larger down payment signals financial strength to sellers, making your offer more appealing. Consider boosting your down payment to demonstrate your readiness to proceed.
12. Have Your Lender Pre-Underwrite Your Loan
To mitigate risks associated with mortgage financing, opt for a reputable local lender willing to pre-underwrite your loan. This reassures sellers of your readiness to close on time.
13. Choose an Experienced REALTOR®
In a market with numerous inexperienced agents, selecting an experienced REALTOR® can make a substantial difference in your homebuying journey. They can provide valuable insights and access to off-market properties.
14. Keep Your Offer Simple
Simplify your offer by avoiding unnecessary details and excessive contract language. A clean and straightforward offer demonstrates professionalism and flexibility.
15. Be Flexible to Meet the Seller’s Needs
Flexibility can be a winning trait. Be prepared to accommodate the seller’s unique demands, especially in situations where sellers seek minimal contingencies and delays.
Navigating a competitive real estate market can be challenging, but these strategies can empower you to increase your chances of success when making offers on homes. These tactics range from mild to aggressive, and you can tailor them to suit specific circumstances. Feel free to share this guide with your Real Estate Broker and use it as a reference when crafting your next offer. Stay positive and continue honing your contract negotiation skills, and you’ll eventually secure the home you desire.