How to Win a Bidding War on a House
You’ve done your homework and identified the area that you’d like to live, so now comes the fun part — finding your dream home.
Attending an open house is a great way to view a home in a casual, low-pressure way, but it can often mean coming up against serious competition.
Right now, high real estate demand continues to outpace the low supply of inventory in the summer’s home-buying market. This often leads to bidding wars. If you’re looking to learn how to win a bidding war on a house, we have some tips and tricks for you.
There are ways to make your offer stand out from competing bids — so come prepared!
1. Be the First Offer on the Table
Acting fast in this real estate market is critical. If you leave an open house knowing it’s the one, ask your agent to put in a bid as soon as possible. This will help you stand out in the seller’s mind — especially if it’s a strong offer.
2. Come Fully Approved
If you can make an all-cash offer, it’s definitely the best route to getting your offer accepted. The only catch? Most of us don’t have a couple hundred thousand lying around.
So, if you can’t do all cash, get approved. These days, most sellers won’t consider an offer unless the buyer has a mortgage pre-approval.
And if you can get a fully underwritten approval — one that requires documentation and all the works —you’re even better off. To sellers, an underwritten approval says you’re a safe bet — that your offer won’t fall through due to financing issues.
Our Approved to Move(TM) program is a fully underwritten approval that’s basically as good as a cash offer — which makes your bid very attractive.
3. Waive Some Contingencies
If you want to convince a seller to choose your offer in a competitive market, you could consider waiving some contingencies.
Contingencies make things harder for sellers. Each one means more potential risk for the seller and a higher chance they’ll end up back at square one a few weeks down the road.
A mortgage contingency says you can back out of the deal if your loan falls through. If you pay all cash or have a fully underwritten approval, the seller knows the money is guaranteed. So a fully underwritten approval is essentially like waiving the loan contingency.
An inspection contingency says you can back out based on inspection findings. Waiving the inspection contingency can be risky for you as a buyer though.
Waiving an appraisal contingency can also give you a leg up on other potential buyers. Our Approved to Move Plus program is a fully underwritten approval which goes a step further — and waives the appraisal contingency. If you take this route, data shows it can increase your odds of winning the house by 66%!
Another way to waive the appraisal contingency is to include an appraisal gap guarantee. This tells the seller that if the home fails to appraise for your full offer, you’ll make up the difference out of pocket.
It’s always a good idea to talk to your agent about which contingencies are smart for your specific case and which ones you might consider waiving.
4. Make a Big Earnest Money Deposit
Earnest money is the sellers to keep if you pull out of the transaction (due to inspection issues, mortgage problems, etc.). So the more you offer, the more secure sellers will feel with your bid — and the more tempting it will be.
Your deposit should reflect how serious you are about the property.
5. Choose a Good, Experienced Agent
When the competition is stiff, a great real estate agent can make or break your chance to win the house. Your agent needs to be responsive and quick on the draw.
Before making your offer, go over every detail with your agent. Once your offer is in, be sure to have your phone on you at all times so you can respond to any questions or additional requests.
When there are lots of offers on a house, things can move very quickly, and if your agent isn’t responding to counter offers within a few hours, someone else can swoop in and win the home.
6. Include an Escalator Clause
Offering more than the home’s listing price is smart when there’s big competition. But just how much do you offer?
You don’t want to offer too much and end up overpaying for the house, nor do you want to underbid and lose out on your dream home — so including an escalator clause in your offer could be a good alternative.
What Is an Escalator Clause? An escalator clause tells the seller that “XX is my offer, but I am willing to go as high as XX if another bid comes in higher.”
Here’s an example: You’ve found a home listed at $250,000. You offer $230,000 with an escalation clause up to $250,000, in $2,000 increments. So say another offer comes in at $240,000, your escalation clause would bump your offer up to $242,000, allowing you to win the bidding war and the home against multiple offers.
7. Write a Killer Offer Letter
Sellers are getting a lot of offers these days, so anything you can do to personalize yours could help. One way to do this is by writing an offer letter.
These are written directly to the seller, and they give you a chance to talk about your love for the home. They can include what drew you in, what plans you have for its future, and how perfect the place would be for you and your family.
Offer letters are a great way to stand out with sellers — and in a bidding war, they may be that little extra that helps you edge out the competition.
Be sure to learn if your state allows this type of letter before you set pen to paper, though. Some states do not accept them because they can occasionally lead to discrimination and violations of the Fair Housing Act.
8. Be Flexible
Being flexible can often make a difference.
If the seller has a particular closing date in mind, try to be accommodating. But do check with your mortgage lender to make sure they can work with any quick closing dates that might be required.
You can also offer to rent back. Many sellers are also buyers, and like you, they might be having a hard time finding a new property. If that’s the case, a great option to get your offer accepted is to allow them to “rent back” the current home from you until they’re able to find a new home.
The bottom line on winning a bidding war for a house in a competitive market — it’s doable. And coming prepared for a home buying battle can help lead you to victory!