You've found a home with a layout that works for you at a price you can afford. There's just one problem: You're not the only buyer who's interested. Because it's competitively priced, you're suddenly thrown into a bidding war. A bidding war happens when two or more buyers are vying for the same property and keep raising their offers in an attempt to land a contract on it. Generally speaking, the best way to win a bidding war is to offer the highest price of the lot. But assuming you can't afford to keep raising your bid, there are other things you can do to come out victorious from a bidding war.
1. Get preapproved for a mortgage
If you're up against competing buyers who are willing to pay cash for the home you're looking at, you may be out of luck. When potential buyers need a mortgage, you can improve your odds of winning a bidding war by getting a preapproval letter from a mortgage company.
A preapproval letter is a document stating that, while you don't have an official mortgage locked in, the bank has vetted you and determined that you're qualified to borrow the amount needed to finance a home in the price range you're looking at.
To get a preapproval letter, just call a bank or mortgage company and ask for one. (If you already have a mortgage, this is especially easy -- just call your current lender.) You'll need to provide basic information like your income, level of assets, and current outstanding debts to get that letter secured.
Once you have your preapproval letter in hand, you can show it to any seller whose home you're interested in. In the case of a bidding war, it might give you an edge over other buyers if your offers are comparable, but you're the only one who's taken that added step.
2. Remove contingencies from your offer
It's common practice to put in an offer on a home that includes contingencies. A common one, for example, is to make an offer contingent on the results of a home inspection. If you're willing to take a chance on the home you've fallen in love with and remove that contingency or others, the seller in question may be more likely to choose you as a buyer.
Be extra careful with this strategy, though -- those contingencies are there for a reason. Be selective about which contingencies you remove.
3. Talk to the seller
Sometimes sellers get a good vibe from buyers and accept their offers over those of the competition. If you're in a bidding war on a home, see if you can talk to the seller briefly about why you want it. For example, if the home you have your eyes on comes with a large backyard and swing set, explain that you've recently had another child and can picture your kids playing in that outdoor space as they grow up. If the seller has children and can relate to that sentiment, he or she may give your offer a closer look, especially if it's in line with competing offers.
If you can't find a way to speak to the seller whose home you're itching to buy, write that seller a letter. The key is to make the decision personal -- in a good way.
4. Be flexible on your closing date
Maybe the seller of the home you want wishes to close quickly. Or maybe he or she wants to delay that closing for a number of months. Either way, the more accommodating you are, the greater your chances of winning that bidding war -- even if it means inconveniencing yourself a bit in the process.
A bidding war can be a stressful, frustrating experience. These strategies will give you an edge over the competition so that when you find your dream home, you'll be less likely to lose it to somebody else.
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