If you’re shopping for a house in one of the hottest real estate markets, where the supply of houses, condos, and townhouses is low and demand is high, you may find yourself in a bidding war, with multiple offers pushing prices ever higher.
Add low mortgage rates into the mix, and buying a home can feel like you’re in the middle of “The Hunger Games,” competing in a fierce battle to win the house you love. At least you won’t perish in this process, but it’s certainly easy to get discouraged if you’re edged out multiple times when trying to buy a home.
The best move you can make before writing any offers is to hire an experienced, professional real estate agent.
Having someone on your side who knows your local market thoroughly — and can guide you through these sometimes tough negotiations — means you’ve got heavy backup when you enter a bidding war.
- Get a preapproval letter from your lender
- Limit the contingencies
- Be flexible on the closing
- Write a ‘love letter’ to the seller
- Don’t count yourself out after a bidding war
1. Get a preapproval letter from your lender
Getting pre-qualified, which merely confirms your income and how much a bank might be willing to lend you based on your credit profile, isn’t the same as having preapproval for a specific purchase offer.
Get a preapproval letter from your lender. Getting prequalified isn’t the same.
You can up your chances of beating out other buyers by including a letter from your bank stating that your lender has underwritten your application and it’s simply pending appraisal.
Submitting all of your financing documentation to your lender before looking at homes and certainly before writing any offers. That way you can pounce quickly when you find the home you want and avoid the stress of submitting preapproval paperwork and writing an offer at the same time.
2. Limit the subjects
Sellers have the upper hand in a multiple-bid situation, and they want offers that are clean and concise. If you know other bids are coming in and you really want a home, avoid putting in too many subjects or making too many demands.
If you know other bids are coming in and you really want a home, avoid putting in too many contingencies or making too many demands.
“Don’t include things like needing to wait for a spouse or partner’s approval, asking the seller to purchase a home warranty or requesting that the seller leaves or repairs certain items”. You also don’t want to ask the seller to pay your closing costs; find an affordable attorney or title company to represent you. Having too many of these items in your contract will make it likely that a seller tells you ‘no’ over another offer.”
3. Be flexible on the closing
Let’s say someone outbids you by a few thousand dollars, but you’re willing to give the seller more time to move out. That flexibility can make you the front-runner in a multiple-bid scenario. Some buyers snag their dream homes even when outbid because they either let the sellers rent back the home for a period or pushed back the closing date.
Extending that courtesy can make your offer more attractive to a seller who might otherwise have to spend more on moving expenses or be crunched for time to find another home.
On the other hand, if a home is already vacant, sometimes you can win the seller over by offering to close in a shorter time. Buyers who offer to close quickly — sometimes within 14 days — can edge out buyers who haven’t been preapproved or have to sell their current home to buy a new one.
Sellers are concerned about liability, theft, holding costs and hazards with a vacant home. Offer to close at the seller’s convenience with occupied homes. Be flexible if the seller needs to find a new home; provide them that time.
4. Write a ‘love letter’ to the seller
With so much fierce competition out there, sometimes appealing to the heart can make your offer stand out. That’s why more and more real estate agents are suggesting that buyers write a heartfelt letter to sellers explaining why they want the house.
I definitely ask my buyers to write a letter and explain how much it would mean to them to get the house. I even have them add a couple of photos of them and their kids or pets. I’ve had selling agents tell me that it was the letter and the complete offer packet that won my clients the listing.
Other real estate agents agree.
“A love letter definitely helps”.Even more important is your online reputation as a buyer. Most good seller’s agents will Google potential buyers to see if they’ve been in a lot of conflicts or if they have a stable job. While this won’t overcome a large difference [in your bidding price], it will definitely help at the margin.
5. Don’t count yourself out after a bidding war
If you lose a bidding war and the seller chooses another bid, have your agent keep in touch if you’re still interested in the house. If a buyer offered way over the asking price, the deal could fall apart on an appraisal or the buyer might be bidding on multiple properties to see which one sticks.
The highest offer doesn’t always mean it’s the best one.
Lappin has seen it time and time again: Contracts that come in way over asking price have a very high cancellation rate. When that happens, [the seller] loses the momentum of being the new home on the market. That could make your offer attractive again.
The homebuying process can feel cutthroat at times, and you may lose one or two bidding wars before you win one; it’s almost a rite of passage. But you’ll be in a better position to win the house you want with a knowledgeable real estate agent to help you write a strong, competitive offer that follows these strategies.