February 4, 2022
If you’re wondering how to win a real estate bidding war, let’s look at what success and winning means. Success in real estate means paying a fair price that’s not over-inflated for a property. It doesn’t mean getting caught up in a feeding frenzy only to find out you overpaid. Read on for our top ten strategies on how to get the home you want for a reasonable price.
1. Bring Your Patience and Determination
The most important tip is to go into the home buying process with lots of patience and determination. Realize that you may need to put in several offers before one is accepted. And in some areas with lots of competition, it could take you months to finally find the home, have your offer accepted, and then go into escrow.
If you have the correct expectations, you’ll be able to do what it takes to be successful.
2. Know How a Bidding War Works in Real Estate
To win, you need to know the rules of the game. With a bidding war, multiple buyers are interested in the same property. These buyers start putting in offers.
Here’s an example:
- The home is listed for $270,000
- Joe submits a full price offer of $270,000
- Sam is also interested in the house and offers $280,000
- Joe comes back with a counter-offer of $300,000
- Sam drops out of the bidding process, and Joe gets the house
A bidding war can have two or more buyers.
3. Consider an Escalation Clause
Here’s how an escalation clause works. A buyer submits a base offer of what they’re willing to pay initially. Along with that, they state their maximum bid – and incremental increases. If another buyer submits a verified bid that’s higher, their bid will increase too.
This is a fast real estate bidding process that can help a buyer get the home they want without getting outbid and not bidding too high.
Chen, James. “Bidding War.” Investopedia, Investopedia, 7 May 2021, www.investopedia.com/terms/b/bidding-war.asp.
4. Get Your Financing Nailed Down
Get a pre-approval letter from your lender and have it ready. There’s no reason to start shopping before you have this letter. Work with your lender and give them all the information they need quickly. That way, when you get your pre-approval, you’ll feel confident in shopping,
5. Have All Cash
One of the most appealing things to a seller is an all-cash buyer. But, if you don’t have all cash and you’ve found a home you love, consider using a service like Opendoor. In many cases, they can give an all-cash offering 48 hours. Then you can take that cash and make the offer.
6. Use an Experienced Realtor
Negotiating skills in a hot market is what keeps a deal going and gets it closed. A buyers’ agent who knows how to negotiate with the seller’s agent is invaluable. Included in negotiating skills is availability. Make sure whoever you hire is available, so your offers get seen, and any questions are answered ASAP. Real estate bidding is an art. The best agents know how to win and protect their client’s interests by not bidding too high.
7. Increase the Earnest Money Deposit
Having a larger earnest money deposit shows the seller’s you’re serious. Comparing two offers, one with a small deposit and one with a larger one, the seller will prefer the larger deposit.
8. Close When the Seller Wants
Besides the financing, the closing date is the next crucial negotiating factor. Have your realtor ask the seller’s agent what they prefer. Some sellers want a fast close, while others prefer a more extended escrow. Other sellers will want to rent back their property for a specific amount of time.
9. Submit a Clean Offer
Make sure your offer is clean and clear without a lot of contingencies. Offer a reasonable price and have your financing lined up. Those three things can make a difference, and your bid will outshine others asking for lots of repairs or trying to negotiate the price.
10. Introduce Yourself
Most sellers want to know that their property is going to a great buyer. Whether you’re single or married with kids, it’s not a bad idea to write a personal letter introducing yourself to the sellers.
In Closing Don’t Ask for the Moon
In a buyers’ market, what you can ask for and get is completely different than what you can get in a seller’s market. Because there are more buyers than properties, home sellers can have their pick of which offers they’ll consider.
So, if you’re asking for a new roof, exterior painting, new carpeting, or new whatever – your offer will be passed over. Consider it from the viewpoint of the seller. They want to sell their home for the best price and the least hassle possible.
In some markets, buyers don’t even get a home inspection. Although it is good to have since it shows you the property's condition, it’s not required. If you do get a home inspection, the data will be primarily for your information rather than a bargaining chip with the sellers.
Work with a great team that includes a trusted lender and real estate agent. That and your patience and determination, you will win in the real estate bidding war.