How to Win a Bidding War and Win Your Home
So you’ve figured out your home buying budget, you’ve got your financing in order, and you know what’s most important to you when checking out homes for sale. And maybe, just maybe, you’ve met one. And fallen in love.
So it’s time to propose… or rather, make an offer! Even though the market is generally depressed, the shortage of quality listings can make for intense competition. So if you’re not in the market for a short sale or fixer-upper, you should expect competition. Just think: how excited were you when you found this ideal home with a great value for the square footage or a prime location? You can bet that someone else was excited, too.
At this point, you may feel anxious or discouraged. We can’t offer that much over the asking price, you might say. Your realtor’s® guidance will be critical now. Their job will be to help you navigate the offer process, keep you aligned with your budget, and provide a steady perspective.
Just like a Republican primary, money does talk, but it’s definitely not everything. In addition to offering the highest you can (and no more), there are some other strategies you can employ to win the home you have your heart set on.
1. Think Fast
Getting your offer in quickly has huge advantages. Your speediness reflects on your organization, and in turn, reflects to the seller that you will likely be an easy close. So before you even make an offer, you need to be ready. Get pre-approved for your home loan, if possible. If you know it’s the one, don’t hesitate and submit an offer.
The Wall Street Journal has a great story about a couple who lost a few bidding wars when looking for a home for sale in Nevada, but then succeeded due to their speediness: “Ms. Corriera called the seller's agent within minutes and found out where she lived. She hand-delivered the offer, with a condition: The seller had three hours to respond. The plan -- aimed at precluding a bidding war -- worked. The Kowalczyks got the house.”
2. Cut Conditions
When it comes to eliminating appraisals (if you’re buying with cash), inspections, or major home repairs, you should definitely consult your realtor® before deciding to forgo them. A lot of people would argue that an inspection should never be waived while others say that leaving the inspection out is how they won their home. It really depends on the specific listing, its general condition, and your willingness to take a big risk.
3. Get Personal
Writing a letter to accompany your offer may be the secret weapon you need to edge out other offers. This totally depends on the sellers. A seller who wants cash, wants it fast, and wants the most won’t likely be swayed by a heartfelt note. A family who is attached to the home, and for whom this sale is not just a financial transaction but a changing of the guard, could be persuaded by a letter. If you write one, explain 1) who you are, 2) why you love the home, and 3) why you would fit as the next owners of the home for sale.
Jesse and Elizabeth of Oakland, California won their current home in this way. “The approach I took was to emphasize enthusiasm, personality, and the fact that we appreciated how they took care of the house—and that we wanted to do the same,” says Elizabeth. “It was evident that the former owners loved the house and had spent a lot of time on it.”
Part of the reason they decided to write the letter (in addition to bidding over the asking price) is that their realtor® tipped them off to the existence of seven other offers! Although they placed a competitive offer, they won the house even after being outbid by someone else. “According to the selling agent, there was an offer higher than ours, but our letter made us stand out as good people to assume ownership of the house.” The dollar amount is not the be-all end-all of a home sale, but the combination of a competitive offer with other bidding strategies and a savvy real estate expert can seal the deal.
4. Give Extra
Assuming you’re offering your best, a little extra can mean money or time. Just like at any auction, sometimes it pays to round up a bit. Sellers can be stressed by the offers, especially if a bidding war begins, and often decide to take the highest offer for easiness as well as making the most of their investment.
Offering more up front in the form of the earnest money deposit speaks volumes. Another strategy is to “rough up” the offer amount like the Demneys: “After deciding that $475,000 was the highest they wanted to pay for the space, they tacked on another $1,000 and made their offer. They found out from their realtors their offer trumped the rival bid by exactly $1,000.”
Finally, offering a little extra time for the sellers to move can also help your offer appear more attractive. As with everything else we’ve discussed, it all depends on your situation as well as the situation of the seller. There’s no telling what they may need, though your local realtor® may be able to give you some insight. If you’re lucky, it will be a match made in heaven.
Sources: Wall Street Journal, personal interview