In today’s market, the pursuit of a home might even be compared to a battle. A bidding war occurs when there are multiple buyers vying for the same property. Prices are being driven rapidly upward and people’s emotions are running high, so you must act with haste. If you’re going to win, you have to play smart. Let’s find out what you can do to put up with the competitive buying without actually stressing it.
What is a Bidding War?
A bidding war occurs when more than one buyer wants to purchase the same property. One by one, they sweeten their offers to outbid one another. This typically occurs where demand is high and supply is low. Sellers love bidding wars because they lead to higher prices. But for purchasers, it can be stressful.
Why Bidding Wars Happen
- Scarcity of housing: When the number of homes on the market is low, buyers bid more.
- Hot spots: Trendy areas offer more competition.
- Nice listings: Homes that are priced right and in decent condition attract multiple offers.
- Market trends: When it’s a seller’s market, bidding wars are widespread.
How to Win a Bidding War
1. Get Pre-Approved for a Loan
Obtain a pre-approval letter from your bank before you begin looking for this home. This demonstrates to sellers that you’re a committed buyer who is financially qualified. It makes your offer stronger.
2. Make a Strong First Offer
You’re starting too low in a competitive market. A solid first offer is a signal that you mean business. (And sellers sometimes accept the first good offer, rather than biding their time.)
3. Limit Contingencies
Divita prefers offers with fewer conditions. If possible, steer clear of tacking on too many contingencies — say, for the sale of another home. But don’t skip out on crucial protections like inspections.
4. Be Flexible with Closing Dates
If the seller requires additional time to vacate, consider a flexible closing date. (Some sort of small gesture like this can make your offer stand out, besides the obvious contract price.)
5. Write a Personal Letter
Sometimes, emotions matter. Send the seller a brief letter about why you love their home. It may not always be effective, but it can establish an emotional bond.
6. Increase Your Earnest Money Deposit
The earnest money is the deposit you put on a house to show the seller that you’re serious. By making a larger deposit, you indicate that you are serious and secure.
7. Use an Escalation Clause
An escalation clause means your offer will rise in increments over that of any other buyer, to a maximum price you specify. This allows you to keep up with the game without having to overpay.
8. Work with an Experienced Agent
A real estate agent worth their salt will adeptly manage bidding wars. They can help you price your home competitively and negotiate smartly.
Risks of Bidding Wars
But before you get high on winning, proceed with caution.
- Overpaying: You could end up paying too much for the home.
- Stress anxiety: Competing can be stressful.
- Regret down the road: Overextending your budget can leave you feeling trapped later.
Have a maximum budget and stick to it.’ Try not letting your feelings get involved in the decision.
Final Thoughts
Bidding wars are typical in today’s real estate climate. With focus and strategic preparation, you can improve your odds of success. Focus on your budget, strong offers and finding a good agent. Owning a home should be exhilarating, not stress-inducing.
FAQs:
Q1. How to tell if a property will spark a bidding war?
If the home is well-priced, in a desirable location and appears to be in move-in condition, it is likely to receive multiple offers.
Q2. If I’m competing, do I have to waive the home inspection?
It’s risky. Inspections save you from hidden issues. Instead of waiving it altogether, you can simply shorten the due diligence period to sweeten your offer.
Q3. Really, can a personal letter make any difference in a bidding war?
Yes, sometimes. Sellers may want buyers who genuinely love their home. But it depends on the seller.
Q4. How much should I offer over the asking price?
It depends on the market. Common in a hot market is 5–10% over asking. Always discuss with your agent.
Q5. What if I lose a bidding war?
Don’t lose hope. Many buyers face this. Just keep looking, and a home will present itself
