By Holly Young, Co-Owner
Shopping for a home can be fun and rewarding as well as frustrating and discouraging. Finding the home you love only to have your offer edged out by another buyer can be heartbreaking, but in this market it’s almost a rite of passage. In a hot market, where the supply of homes is low and the demand high, you may find yourself in a bidding war with multiple offers.
Here are 6 tips to making a winning offer:
1. Include a preapproval letter with your offer
Don’t prohibit a seller from taking your offer seriously by not including a preapproval letter or proof of funds (in the case of a cash offer). The seller will be assured of your financial viability with a letter from your lender that corroborates your ability to make a purchase. Getting preapproved before looking at homes will ensure you can pounce quickly when you find the home you want. You will also avoid the stress of submitting preapproval paperwork and writing an offer at the same time.
2. Make a clean offer
Put yourself in the seller’s position: if you were presented with two identical offers but one was firm and binding and the other conditional upon inspection, upon financing, or upon anything, which one would you choose? Sellers want offers that are clean and concise. If you know other bids are coming in and you really want a home, avoid putting in too many contingencies or making too many demands. That being said, one contingency you should think twice about before waiving is the home inspection. Should the inspector discover a major problem at the home, you may want to protect your right to back out of the purchase.
3. Have the best terms
In a bidding war situation, the seller is reviewing more than one offer to determine which the best fit is for them. The terms of the offer, not just the price, may determine which offer they choose. A good agent will give you the edge by finding out what the seller’s desired close date is so you can marry your offer to that date. A sizable deposit may also help sweeten the impression of your offer over another. If it comes down to a few thousand dollars, an offer with more attractive terms may win the day.
4. Write a letter to the seller
While this won’t overcome a large difference in your bidding price, it will definitely help at the margin. Let the seller know who you are and why you love their house. A heartfelt and sincere letter that includes a picture of yourselves, children, or pets will make you stand out as more than just a number on a page and build rapport with the seller.
5. Use an escalation clause
An escalation clause is a term in an offer that states you will pay x price for the home, but if the seller receives another offer that's higher, you will increase the offer by some increment up to y price. In theory, an escalation clause is fairly simple. In practice, there are a lot of details involved, especially if there are two or more offers submitted that contain escalation clauses. Some sellers don’t like escalation clauses and prefer that buyers submit exactly what they're willing to pay. Your agent can find out whether an escalation clause will be favorably received.
6. Work with an agent who knows the market
Working with a real estate professional who is an expert in the market is crucial in a multiple offer situation. There are countless strategies and details that an experienced agent can navigate to give you the competitive edge. That edge may determine whether you will be on the winning or losing end of a bidding war.