Have you ever tried to buy a home and found yourself in a bidding war? Suddenly you’ve got to come up with your best possible offer to beat the other offers. It's so deflating when your offer doesn't come out on top. Let’s explore 6 options to help you win the bidding war on the house of your dreams.
A bidding war happens when a number of people make offers to buy the same home and outbid each other again and again. As the price climbs, some buyers drop out while others continue to compete to win the house. What makes the winning offer stand out more than the others? Consider the following options when you're faced with a bidding war and you'll have a great chance of winning.
The Right Agent
Want to win a bidding war? Start by interviewing a variety of experienced real estate agents. Ask if they’ve dealt with bidding wars and how they've handled them. When housing inventory is low and there are a lot of buyers, you’ll be glad you found an agent with experience. If you hire an agent who doesn’t know how to handle a bidding war, you aren’t doing yourself any favors.
You can ease the home seller’s mind by offering to buy the property “as is” but schedule an inspection too. Letting the owner know you’re comfortable with the home’s condition, and you aren’t going to ask for repairs to be made, will put the seller at ease.
To protect yourself, you’ll also want to include the right to terminate the contract without penalty if there are too many issues revealed in the inspection. You could indicate in the agreement that you only want health- and safety-related repairs covered by the seller. You could also set a predetermined amount the seller would be responsible for if the inspection repairs were high, over $1,000 for example.
Bidding Over Asking Price
Does bidding over the asking price sound a little bit scary? Not if you have an experienced agent in your corner who can save you from bidding much too high and getting in over your head. Your agent can run comps to determine how much you should go over list price, based on the neighborhood and condition of the home. Discuss how much you can afford to spend based off of your lender pre-approval and write another offer.
You might be asking what an appraisal gap is. When a real estate agent prices a home, it might be higher or lower than the appraised amount, hence an appraisal gap. When you’re using a loan to buy a home, your lender will require an appraisal. In your written offer, state that you will pay the difference between the list price and the appraised value of the home. Your agreement should include a maximum amount you’re willing to pay (ex. $3,000). Keep in mind, this could change the amount you’ll pay for a down payment.
Many sellers are thrilled to hear you want to close quickly. Instead of a 30+ day close, you could offer to close in 2 weeks. Consult with your agent and lender to see if this is allowable with your loan.
Free Rent Back
Can you imagine selling your home without having another one to move into? That’s where free rent back can be a great relief to the seller. Have your agent talk to the seller’s agent to determine whether or not they’ve found a new home. If not, you can offer the sellers the option to stay in the home, rent free, for a short period of time. Essentially, they are renting the house for free while they look for another home.
When it comes to winning a bidding war, talk to your real estate agent about the options above. Get everything in writing and make sure your agent is communicating often with the seller’s agent. Your agent can help you win a bidding war by quickly taking action and writing an offer that includes options that please the seller. Prepare for a bidding war before you begin looking for houses. You will be glad you did!
Learn more about home buying in our in-depth guide: