From the buyers’ standpoint, getting into a bidding war for a house they want is never fun. They can end up offering more money than they ever planned to spend, and still end up without the home of their dreams.
A real estate agent should be able to tell you ahead of time if bidding wars are likely in your desired neighborhood. Here are four real estate tips to win a bidding war, if it comes to that:
- Make a high offer. Instead of making a low offer with the expectation that you’ll increase it if you have to, offer as much as you can afford immediately. Let the seller know this is your best offer, and that you can’t go any higher. This can help avoid any haggling back and forth, and will save you time and hopefully will get you the house.
A variation of this method includes offering $20,000 or so above the asking price, showing upfront that you’re a serious buyer.
- A big down payment: Having a large amount of cash for a down payment of 20 percent or more can show you’re a serious buyer. Get a pre-approval letter from your lender, have paperwork proving you have the money, and pay a higher earnest money deposit if you can.
- Go conventional: Instead of getting an FHA or other government-backed loan that can have longer escrow periods, be approved for a conventional loan. This can require coming up with a bigger down payment and having good or excellent credit scores, but can lead to shorter waiting periods and show you’re a strong buyer.
Have the paperwork from your lender available to submit with your offer, such as a pre-approval letter. If you’re offering cash, you’ll also need paperwork to prove you have the money. Having a higher earnest money deposit can also help.
- Add an escalation clause. An escalation clause allows your real estate agent to go above the highest offer, but only to a point. For example, on a home with a listing price of $350,000, you could make an offer of $400,000 with an escalation clause of $5,000 over the highest price but only up to $450,000. If another buyer offers $425,000, your automatic clause would increase your offer to $430,000.
However you enter a bidding war, always remember that your exit strategy is pretty simple — there are always other homes on the market waiting for you to buy.