Sometimes the demand for homes exceeds the supply. This is known as a seller’s market. A seller’s market poses a real challenge to buyers who must compete with many others wanting to buy the property. Such situations may result in bidding wars which can drive the sale price well beyond the initial asking price. Before learning how to win a house bidding war, let’s look at the definition.
What is a Bidding War?
What’s the first thing that comes to mind when you hear the term “bidding war”? A bidding war is a competition that takes place between potential home-buyers for the same house or property. Buyers prepare to offer the highest amounts, so they can own the property of their dreams, beating others to it.
Bidding wars are aggravated by a lack of suitable housing options, a great location, lots of buyers, and a rising number of investors with ready cash.
The Realtors Confidence Index Survey provides us with some facts about the realty market.
In 2021, properties stayed on the market for an average of 20 days. This dropped to 18 days in February 2022, indicating a fast-moving real estate market.
Cash offers made up a quarter of the homes sold, compared to 22% year over year.
So, how to win a house bidding war? Let’s find out.
What Does the Seller Want?
Sometimes people forget the seller’s role in winning a house bidding war. It is the seller who decides on which offer to accept. Find out whether the seller wants to close the deal quickly, or whether they want to occupy the home for longer, i.e. more than 30 days. Knowing the answers to these questions will help you to plan your strategy.
Use Cash for Your Down Payment
Cash is the fastest way to get an offer approved. FHA and VA lenders prefer a down payment of more than 20% for a conventional loan. For the seller, a preferred buyer is one who can lay down a cash deposit for a conventional loan. The buyer should have all the paperwork available when submitting an offer, including a pre-approval letter. If you are paying in cash, take proof that you have the money to pay.
Concessions to the Seller
To win a housing bidding war, you could offer an amount towards the seller’s closing costs. Allow the seller to choose the settlement attorney. You could also offer to share the decision on contractors or inspectors. You have the right to ask for repairs. You should allow the seller to live in the home rent-free for a certain period of time after closing.
This aspect is a major risk in winning a housing bidding war. Many of the offer letters include a point allowing you to cancel the sale if there are major problems picked up in the home inspection. If you’re wondering how to win a bidding war on a house, you could strengthen your offer by taking a chance and skipping the home inspection. Here is a walkthrough checklist for sellers who want to make the most from the bidding war –
- Check the lights, showers, faucets, and outlets in each room of your home
- The home security system must work
- Make sure that there are no cracks in the foundation
- Home appliances should be in top form
- Clean the gutters
Give the required information to the seller and invite them to get in touch with you or your real estate agent in case of any questions. The key to winning the house bidding war is to respond to any queries as quickly as possible, be flexible and stay on the seller’s radar. It is important to signal your availability right from the start so that you will be the first one to know of any change in circumstances.
What if the seller of your dream home accepts another offer? You have no choice but to move on. Sometimes the seller may accept backup offers. Find out whether the sale is pending or whether the seller is still accepting offers. Sometimes sellers have a kick-out clause in the offer that gives them the authority to continue to accept offers while the potential buyer waits for the home inspection. If the seller decides to accept another better offer, he must inform the holder of the first offer and give him instructions for continuing with the sale. For instance – Match, or exceed, the offer, or agree to waive all/some contingencies.
If there is no kick-out clause, stay informed throughout the sales process. Buyers often back out from buying a home. As soon as the sale falls through, grab the chance. It is important to match or even exceed your last offer. Unless you do, the seller may change his mind and put the property back on the market.
To Make a Long Story Short
The steps you take can make or break your chances of winning a bidding war. Get mortgage pre-approval, make your best offer, and show the seller that you are serious about buying the property Follow our tips to increase your chance of winning a house bidding war.