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This is a guest post by The Money Minimalists.
After weeks of searching you’ve finally found your dream home, only to find out there are multiple offers!? It’s easy to feel defeated and overwhelmed, but I’m here to share my tried and true strategies on winning a bidding war on your dream home!
As a Realtor in a seller’s market (which is when there’s less inventory than there are buyers), multiple offer situations are part of my day-to-day. The most important thing is to make your offer stand out and be the highest and best offer it can be.
The seller is a person just like you and by using these strategies, you will be able to win your dream home!
If you’re shopping for a home during the current COVID-19 pandemic, you will most likely encounter multiple offers due to limited inventory. There are also a few other changes you should be aware of during your home buying process.
1. Act Fast
If it’s your first home you might be tempted to think it over and wait until the next day to offer, but time is money. You need to act ASAP and submit an offer because homes are going under contract the same day they’re being listed.
It’s better to go under contract and back out later than to lose out on any chance you had. You’re usually able to withdraw or back out of a contract during the due diligence period if you decide to move onto a different property. (Please confirm with your local Realtor as all states have different contract guidelines).
2. Have The Realtor Call The Listing Agent To Try And Squeeze Information Out Of Them
Before writing an offer, have the realtor call the listing agent to try and squeeze information out of them. Sometimes listing agents won’t share any information about current offers, but other times even an inkling of information can be valuable.
If you know what the competing offers are, you can create a stronger offer. Also, this highlights to the listing agent how you are proactive and willing to collaborate.
3. Write A Heartfelt Letter
Personalize your offer by showing the seller who you are. A bidding war isn’t just about numbers, sometimes a heartfelt letter can influence the seller enough to help you beat out other offers. Write an epic personalized letter that introduces who you are, why you love the home (include specific things to the house), and what it would mean for you to live there.
If they have a cute nook under the stairs that would be perfect for your dog, talk about that! If they have travel photos all around their bedroom, discuss how much you love to travel and how you felt connected to them! Try doing a little social media stalking to see if you can find some common interests. Pull at their heartstrings.
Another great tip is to add a picture of you with your pets, partner, or whoever else will be living with you. Putting a face to the offer is vital and makes it harder for the seller to say no. I once had a client who took a picture on the front steps of the actual home with her family, that is taking this one step further!
Here are some examples to get you started!
4. Film A Personalized Video
If you’re really wanting to stand out I recommend filming a personalized video. This will truly capture your essence and the emotion behind your love for the home. Make sure to include everyone who will be living at the home (yes, even your pet lizard!).
5. Add An Escalation Clause
What’s this?! This is one of my favorite tips that many Realtors don’t know about! The way it works is it keeps increasing your offer above competing offers until you come out on top! This way you don’t have to keep resubmitting new offers. You set a “cap” amount to the highest you’re willing to go, and an increment amount! Here’s an example:
Initial offer: $200,000
Escalation increment: $500
Cap amount: $205,000
So if someone offers $204,000 your offer will automatically bump up to $204,500 and be the highest offer!
This is a great tool because it takes out the guesswork of what you should offer and it keeps you from overpaying when you don’t have to. Be sure to ask your real estate agent about this.
6. Offer A Higher Escrow Deposit (Here It’s Common To Be 1%, Double It!)
An escrow deposit (also called an earnest money deposit) is the amount you submit to the seller within 3 days. The higher this amount is, the stronger your offer. (Keep in mind that this goes towards your down payment so you will be paying it eventually anyways!).
Typically the amount I see is 1% of the purchase price, so if there’s a bidding war I advise offering at least 1.5%. The more you offer, the more “skin in the game” you have and the seller will appreciate how serious you are about the home.
7. Shorten The Inspection Period To 7 Days Or Less
Typically an inspection period (or due diligence period) is the amount of days you have to perform any inspections and back out of the contract if needed. The shorter this is, the more attractive an offer is to the seller.
The seller will want a shorter time period for you to back out so by decreasing your inspection period from 15 to 7 days it’ll set you apart. You can shorten it to less days but confirm that your inspector is available and can return the report back to you in time.
8. Cater To The Seller’s Need For The Closing Date
Have the real estate agent ask what closing date the seller prefers! Sometimes the seller wants a shorter closing, sometimes they’d like a longer one. Try to accommodate as best as you can.
Discuss with your lender to see if they can close on the home faster than average to help you win the deal.
9. Have The Realtor Craft An Email Summary Of The Offer, Their Process, And Their Past Success
When the Realtor is submitting the offer, make sure they’re crafting a summary of the offer. There is a lot of paperwork involved and with multiple offers it can get overwhelming.
By having a summary sheet going over the most important details of the offer, the listing agent and seller can better wrap their mind around it. They will also remember that you made it simpler for them and this will help put you in a more favorable position.
10. Have The Realtor Call The Listing Agent & Tell Them It’ll Be A Smooth Transaction
Make sure that the Realtor is calling the listing agent and introducing themselves to the listing agent. Have the buyers agent go over the offer with the listing agent and assure them that it will be a smooth transaction.
The biggest hiccups in a transaction stem from an inspection and the financing. If the buyer’s agent can reassure the listing agent that the inspector is well versed and that the lender is experienced, then that can put the listing agent to ease.
11. Have The Lender Call The Listing Agent
The lender should call the listing agent and assure them that you are pre-approved and eligible for the loan. By reiterating to the listing agent that you are of sound financial standing, they will be more confident in your offer.
12. Express How You’re Open To Collaborate
In a bidding war, your offer might be slightly worse than another one so be sure to let the sellers know you’re open to negotiations. Don’t let them think that the offer you submit is your final offer. This shows flexibility and willingness to work as a team.
Final Note
Every real estate agent has their own tips and tricks on winning a bidding war but those were 12 of my signature methods that have helped me win in numerous multiple offer situations. Above all, listen to your real estate agent’s expertise, they may have unique suggestions that I have not mentioned here!
If you know any first time home buyers looking to buy a home right now, please share these winning bidding war strategies with them so they can move into their dream homes!
About The Author
Kseniya Korneva is a finance and real estate blogger for The Money Minimalists. You can find Kseniya on Facebook, Instagram or Pinterest.
If you liked this article, be sure to check out The Money Minimalists for other real estate and personal finance content!
DISCLAIMER: Everything I said here is based on my experience as a licensed real estate agent in Florida. If you’re in a different state or country, please confirm with your local real estate agent.
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We lost a bidding war last year. I wish I had this then. Thanks for sharing.
I’m sorry to hear that, it’s a difficult market out there but it will work out for the best! Hopefully these strategies will help you in your next home 🙂
-Kseniya with The Money Minimalists