When purchasing a home in a seller’s market, buyers naturally want to make their offer stand out from the rest. In many cases, multiple buyers are vying for the same property and end up in a bidding war. In fact, one of the primary reasons longtime home searchers have not yet closed on a house is because they are repeatedly outbid, according to the National Association of Home Builders. A 2021 report from the organization found that 45 percent of potential homebuyers said being outbid was the biggest challenge they faced in their search.
What is a bidding war, and how does it work?
In real estate, a bidding war can happen when there is more than one potential buyer making an offer on a home. These buyers compete to become the new owner of the property by incrementally increasing their offers — often pushing the price higher than the original property value.
It’s not always simply the highest bid that wins in a bidding war, however. Many buyers also use non-financial strategies to convince the seller to accept their offer, such as waiving inspections or certain contingencies.
Bidding wars most often happen when the housing market has limited inventory — a seller’s market, like we have today. They can also happen when homebuyers are under some sort of constraint, like a certain deadline they need to meet. In some cases, too, a listing might be purposely underpriced to incite a bidding war.
How to win a bidding war: 7 strategies to try
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 can help guide you through the process, as well. Here are 7 tactics to try if you want your offer to stand out from the rest.
1. Have your preapproval ready
Getting preapproved for a mortgage shows a seller that you are able to afford their home, and have the financing to do it.
Take note, however, that there’s a difference between being preapproved and prequalified. Generally, a preapproval carries more weight than a prequalification. The latter is simply an indication that you could be approved for a loan, while the former is an official notice that the lender has already reviewed your finances and approved you for a certain amount. Neither constitute a guarantee, though, which is why there is usually a financing contingency in real estate contracts.
2. Increase your offer
Simply put, being willing to pay more money than other buyers is one …….