It’s a home shopper’s worst fear: being out bid by a rival buyer. Few things are more frustrating than making an offer on your dream home, only to have another buyer snatch it out from under you. Worry not–there are strategies you can use to improve your odds in a bidding war. But make sure you get pre-approved before doing any of these things. Bidding strategies are no good unless you — and the seller — know you can really afford the house.
A brand new study by Redfin revealed three key tactics for winning a bidding war and beating out another buyer:
Offer all cash — This strategy was found to improve a competitive offer’s chance of success by 206%.
Write a personal letter to the seller — A personal letter can improve your likelihood of success by 59%.
Wave a financing contingency — This can improve your odds by 20%.
These three strategies plus a low mortgage rate will have you set to make a winning offer on your dream home. Here we outline them in more detail:
Offer All Cash
An all-cash offers signals to the seller that you are financially stable and committed to the home. All cash offers seem much stronger and attractive than financed offers. It’s not uncommon for a seller to even select a slightly lower offer from an all-cash deal just for the increased certainty—reducing the amount of risk for the seller. Plus, cash deals close more quickly. Of course, you should only consider this option if you have the money saved up.
Don’t drain your entire savings and retirement funds to purchase a home. Also, don’t believe that a far-lower cash offer is better than a bigger financed offer—the price you offier is just as important as how you pay. Getting prequalified can show a seller you’re able to make good on your offer, without having to fork up all-cash. In 2019, only 19% of existing home sales were all-cash transactions. Not paying cash? Try a letter to the seller to help seal the dea.
Write a letter
Most people won’t be able to make an all-cash offer on a home. There are other ways to sweeten your offer as a home buyer. Try writing a personal letter to the seller. It’s proven to work and it’s free! The most effective notes to sellers include heartfelt stories, special observations about the home and neighborhood, or even some humor. Giving some backgroundon you and your family or pets can humanize your offer and put the seller in your shoes. It can also make them more confident in you as a buyer. It creates a connection you can’t get through money or waived practices.
Waive the financing contingency
A “financing contingency” in a real estate contract says that your offer is dependent on being able to secure financing. Basically, it means that you can’t buy the house without a mortgage. By waiving this contingency, you risk forfeiting your earnest deposit to the seller if your lender is unable to complete you financing. But it can also give you an edge over other interested buyers. Waiving the financing contingency in a bidding war strengthens your offer because you are representing that getting financing won’t be a problem.
Buyers who know that multiple offers are on the table will waive the financing contingency as part of their strategy If you feel secure enough in the home and what it has to offer, then this is recommended.
Before you can make an offer on a home, you’ll want to make sure you can afford it. A pre-approval letter is the first step in the home buying process. With a pre approval letter in hand, both you and the seller can feel confident your offer is a good one.
Start the pre-approval process right here. Fill out the form below!