15 Tips To Win a Real-Estate Bidding War

Real estate bidding wars may have faded since the pandemic's peak, but a competitive offer is common in almost any market. Even if you're just competing against one other buyer, it pays to be strategic with your offer.

If you want to make sure your offer has the greatest chance of beating out others, keep reading for 15 ways you can win a real estate bidding war.

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If you want to ensure you don't lose money offering more than you need to win the bidding war, an escalation clause is the way to go. With an escalation clause, you make one offer -- for example, $400,000 -- but you include the option to escalate the offer to, say, $450,000 if there are offers higher than $400,000.

Escalation clauses aren't legal in every state, but if they are allowed, it makes sense to use one in a multiple-offer situation.

ALSO READ: Buying a Home? This One Move Can Help You Avoid a Bidding War

If you're in the position to do so, offering cash or a higher down payment is a good way to win over a seller, as they're likely to choose a cash offer over an equal one requiring a mortgage.

Paying with cash eliminates any delays from dealing with a bank and avoids the risk that a deal will fall through if the bank denies the loan, for example, if you lose your job.

Writing a letter is a tried-and-true tactic for winning over a prospective seller and helping you build rapport. Be sincere but also flattering about why you want their property and explain why it would be just the right place for you. If the seller can relate, they might choose you over even higher-priced offers.

Is there something you have in common with the seller? It could be something seemingly irrelevant -- like you both own the same kind of dog -- but a commonality can help make your bid stick out in a crowded market. If your agent can get you some information on the seller, try to find a unique way to connect with them.

ALSO READ: How To Make an Offer on a House

This one's hard to customize, but your bid could get extra attention if you fit the seller's idea of the kind of buyer they'd like to have. If, for example, you're buying a home for your family and the seller's family grew up in the house, your bid is more likely to stick out. Similarly, if the seller has taken care to create an elaborate garden, you're likely to benefit if you have a green thumb.

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This one should really only be used by experienced homebuyers, especially those who know a thing or two about home improvement. If you do fit in this category, waiving inspections could be a good way to catch a seller's attention. That could be especially true for an older house, as the seller may not want to deal with the issues that come up during inspection.

Still, you should be aware that waiving inspections is a risky strategy.

Another risky strategy that's a better idea for more experienced homebuyers is to fire your agent and use the 3% commission the agent would have gotten as a carrot for the seller's agent and the seller. For example, you could use that 3% savings to offer 1% to the seller's agent and 2% to the seller. In a competitive offer, that could make a key difference.

ALSO READ: Can You Negotiate Real Estate Agent Fees?

Earnest money is the deposit you agree to make before closing while the home is under contract. The money shows that you're serious about buying the place and essentially locks you into a deal, pending an issue that comes up during the inspection or with the financing. Offering a larger-than-normal amount of earnest money shows you're serious about the home and could help you beat out a similar offer.

A seller has a lot of work to do between accepting an offer and closing. Namely, they have to pack up all their stuff and move out, and they might not even have another place to go since the sale timing is unclear. Therefore, making it clear that you are flexible with the timing of the closing can help curry favor with the owner.

It's essential that you are pre-approved for a mortgage when shopping for a home, and it helps to have the pre-approval letter ready for the seller. Additionally, if you're anticipating a bidding war, you should look into getting pre-approved for more than the asking price. While that may mean losing leverage with the seller, it also gives you a greater chance of winning a potential bidding war.

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This one might seem obvious -- after all, a bidding war implies that the highest offer will win -- but it deserves to be discussed. If you have the means to win a bidding war outright, you should still consider how much you feel comfortable spending. You don't want to overpay if you don't have to, especially if the home isn't likely to appreciate significantly.

ALSO READ: How Much House Can I Afford?

During the homebuying process, you'll likely hear from a number of people, including your buyer's agent, the home inspector, and the mortgage broker.

It's important to be available, as decisions in a bidding war happen quickly, and if there's a deadline for an offer, you could lose if you're not responsive.

A home appraisal is part of the closing process if you're getting a mortgage. If the home appraises for less than the offer price, you could be in trouble. That's because your mortgage will be based on the appraisal rather than your offer price, so if there's a difference between those two, you'll have to pay it yourself. Communicating to your seller that you're prepared to make up the difference can help you win the deal.

You want to look like a pro when shopping for a home, especially if you think you might end up in a bidding war. One way to do that is to have your closing team lined up ahead of time, including your attorney, and have your information on your personal assets ready as well. That helps signal that you're serious about buying the house.

ALSO READ: How To Invest in Real Estate

Closing costs are one of the downsides of real estate transactions for both buyers and sellers, but if you're in a competitive bidding war, you may want to offer to pay your seller's closing costs. That will relieve a financial burden for them, give them extra money, and let them know you're considering their interests.

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With mortgage rates continuing to rise, housing demand will likely continue to fizzle. While we may never see a housing market like the one during the pandemic, bidding wars are here to stay. It always helps to have a few good negotiating tactics up your sleeve.

Using some of these tactics will help you look professional and well-prepared and increase your chances of getting the home of your dreams.

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