What Is A Bidding War? Strategies For Homebuyers And Sellers
Bankrate
Written by Sarah Li Cain
When purchasing a home in a seller’s market, buyers have to ensure their offer stands out from the rest. In many cases, multiple buyers vying for the same property end up in a bidding war. Some homebuyers many even include an escalation clause to increase their chances of winning.
What is a bidding war?
A bidding war can happen when there is more than one potential buyer making an offer on a home. These buyers end up competing to become the new owner of the property by increasing the price of their offer, often pushing the price higher than the original property value. In a bidding war, buyers might also use other strategies such as waiving certain contingencies to convince the seller to accept their offer.
Bidding wars most often happen when the housing market has limited inventory — a seller’s market — and when homebuyers are under some sort of constraint, like a certain deadline they need to meet.
8 ways to win a bidding war
If you’re a homebuyer today, especially if you’re looking in a sought-after location or for an entry-level property, chances are you’ll face a bidding war. Don’t be discouraged — there are ways you can come out on top in a multiple-bid situation. Your real estate agent should be able to help guide you through the process, as well.
1. Increase your offer
2. Up your down payment
3. Pay in cash
4. Get preapproved
5. Hire a home inspector
6. Waive contingencies
7. Add an escalation clause
8. Write the seller a personal letter
1. Increase your offer
Simply put, being willing to pay more money than other buyers is one of the best ways to get your offer accepted. You may not have to increase your offer by a lot — it’ll depend on the area and other factors — so look to your real estate agent for guidance.
Keep in mind that when increasing your offer, you may need to come up with the extra cash yourself. Lenders mostly finance loans in the amount of what the home appraises for, not more.
