How to Win a Bidding War
A bidding war is a real estate term that describes the scenario when multiple interested parties make offers on the same house. Then, the seller decides which offer they want to accept. If the offers are similar, the seller could ask the potential buyers to increase their offers to outbid each other.
To purchase a house, buyers need to show that they qualify for financing beforehand. Therefore, a buyer has a significant advantage in winning the bidding war by getting a mortgage pre-approval letter. With a mortgage pre-approval, a lender evaluates your finances, like your credit score and credit report, to decide whether they can lend you the money to buy the house. A pre-approval letter boosts the profile of a potential buyer, signaling to real estate agents and sellers that you’re financially approved to buy the house. It’s better to have a pre-approval letter with any offer you make in order to be a more serious candidate for the home.
Making a competitive offer by increasing your bid is another strategy to get the seller’s attention. Figure out how much more you can afford to spend. If needed, keep increasing your price until you’ve reached your budget limit. Of course, it’s still possible to lose the bid, but if you really want the house, it’s best to err on the higher side earlier on.
Increase Your Earnest Money Offer
Making a competitive offer can help improve your chances of getting the home you’re making an offer on. A part of increasing your chances can include providing more earnest money, which is similar to a security deposit. Buyers usually provide 1-2% of the home’s purchase price as earnest money. It gives the seller more assurance that you will follow through with your home purchase. – Tip by Saratoga CA Real Estate Expert Amar
So, if you put down more earnest money, it will show the seller that you’re serious about your offer and that you will follow through with the purchase until closing.
With home purchase contracts, contingencies allow buyers to walk away from the deal without losing their earnest money if they can’t meet certain conditions. But, if you’re in a bidding war, you’ll want to use these contingencies carefully. If you submit a clean offer free of excessive contingencies and demands, your offer will stand out for the better.
Being flexible with the closing and move-in date can help win the bidding war. Time is valuable, and the seller may need more time before the buyer closes or moves in. Agreeing to keep the home inspection contingency short helps get one hurdle out of the seller’s way. When the seller accepts an offer, and their house goes off the market, a seller usually doesn’t want to wait long for the home inspection to occur. So make the contingency period no longer than one week to eliminate the stress on the seller waiting around for the inspection date.
When handling multiple offers, sellers typically accept the most attractive offer. In addition, this offer usually goes above the asking price and includes extra perks. Ensuring you have a plan of action figured out beforehand can ensure you are quick to submit offers and counteroffers.
So hit the ground running with your best offer, as well as financial proof that you can close on the home. Discuss what your price ceiling is, what perks you are willing to include and which you aren’t, and what bargaining chips you have in your pocket. Ultimately, the seller makes the final decision, but your agent can discuss a strategy to handle bidding against multiple offers to entice the seller as much as possible.