Bidding wars in extremely competitive real estate markets can be overwhelming and downright ugly. You may have found your dream home only to be outbid by another buyer. In this post, we’ll provide a detailed guide on how to bid and win on a house with multiple offers. Here are nine easy steps you can take to make sure your offer stands out:
- Leverage an experienced real estate agent and loan officer
- Pre-underwrite the loan
- Present an offer with no contingencies
- Offer a larger down payment and earnest money deposit
- Add an escalation clause
- Waive the appraisal contingency
- Present an all-cash offer
- Position yourself as flexible
- Write a personal letter to the seller
Now let’s take a closer look at each of these strategies and learn how you can put them to practice.
1. Leverage an experienced real estate agent and loan officer
Buying a home as a first-time homeowner doesn’t have to be stressful. A qualified real estate agent that knows and understands the market can ease your headaches, saving you time and money. The agent will not only handle the negotiation process with the seller’s agent when there are multiple offers involved, but also recommend reputable lenders with favorable interest rates.
Having an experienced loan officer with roots in the local community can provide the support you need to enable the deal to sail through. You can also request to get the mortgage pre-approved to ease the process.
2. Pre-underwrite the loan
One way to handle multiple offers on a house is to show the seller and agent you are serious about buying the home. Most sellers fear the deal falling through the cracks due to mortgage loan denials. You can request your lender to pre-underwrite your loan before you table an offer.
CrossCountry Mortgage provides a FastTrack Credit Approval process that enables borrowers to get their credit underwritten before placing a bid with the seller.
A pre-approval indicates that you already have the funding ready, improving your negotiating power. You may also enjoy a faster closing process, with the possibility of waving your financial contingency.
3. Present an offer with no contingencies
If you’re still wondering how to bid and win on a house with multiple offers, consider waiving the buyer’s contingency clauses. Contingency offers effectively prevent unwanted surprises after you buy a house, such as expected repairs and title defects.
With an increasing shortage of homes in the real estate market, you can sweeten your offer by removing any contingencies in your contract. The strategy does carry a heavier degree of risk. You may need to discuss the options available with your real estate agent before deciding to wave your financing contingency or inspection contingency.
4. Offer a larger down payment and earnest money deposit
Down payments are often a strong signal of the buyer’s financial position in the seller’s eyes. A larger down payment may indicate a stronger commitment to completing the deal as the seller analyzes the different bids. More money in the bank shows the seller you are less likely to walk away after low appraisal values or higher-than-expected repair costs.
You may also include earnest money to persuade the seller to accept your offer. Sellers are fond of buyers who make good faith deposits, indicating a strong intent to get their dream house. The rates may vary depending on the location, with an average of 1% to 3% of the purchase price.
5. Add an escalation clause
An increasing shortage of home inventories is pushing homebuyers to be creative in persuading sellers to accept their bids. An escalation clause is a provision in the buyer’s contract that allows you to match and offer more money than the highest bid until a certain maximum price.
For example, suppose that you are bidding for a $300,000 home. You can insert a clause that allows you to increase your offer by $3,000, up to $350,000. If the highest bid is $320,000, your offer stands at $323,000 automatically. Unfortunately, if anyone bids above $350,000, you may lose out on the property bid war.
You may need to be careful before adding an escalation clause. Seller’s agents can exploit the terms to gain more money, forcing you to pay for the home at a dollar amount much higher than your initial contract price. Consult with your real estate agent before using this extremely aggressive strategy.
6. Waive the appraisal contingency
Appraisal discrepancies are one of the leading causes of house sales falling through the cracks. Appraisers will typically value a home below the contract value, especially if the prices skyrocket faster than they can justify. The lower figure can cause sellers to walk out of the deal.
You can make your offer desirable by offering to cater to a part of the appraisal gap. It may mean paying higher than the actual value of the home. Waiving the appraisal contingency and contributing funds to cover the discrepancies guarantee the seller that they don’t need to drop the initial price after the home inspection.
7. Present an all-cash offer
The easiest answer when you're considering how to get an offer accepted for a house with several bids, is to provide an upfront cash payment. An all-cash home payment means you have the money to see the deal through.
It also translates to a simple, clean offer without contingencies from third parties such as mortgage lenders. You can eliminate the concerns that arise from financing and facilitate a faster closing process.
8. Position yourself as flexible
You can also provide a little wiggle room for the sellers’ demands. If you can cover your own closing costs, offer to do so. Each seller may have different needs, and positioning yourself to address them quickly can make it easier for you to win over other buyers to the purchase.
Ensure your real estate agent maintains timely communication, allowing you to respond to the seller quickly. Showing intent to complete the transaction fast and with minimal contingencies can entice the seller to accept your offer.
9. Write a personal letter to the seller
An outdated approach is to include a heartfelt letter alongside your contract offer to the seller. You can use the letter to show that you treasure the home in which they made innumerable memories, nudging them to accept your bid.
While drafting the letter, you may need to be careful, avoiding references to your religion, race, or political views, which may trigger an unconscious bias. For this reason, the National Association of REALTORS® advises against drafting personal messages.
An increasing number of lawsuits citing violations of the Fair Housing Act are pushing real estate agents and their clients away from this technique. Be informed about all the fair housing laws before you decide to write a letter to the seller.
Can I outbid an accepted offer?
It is possible to outbid an offer that has already been verbally accepted. If a purchase agreement has not yet been signed the bid is not technically yet under contract.
Once a purchase agreement is signed there are opportunities to outbid the current buyer, but it is more difficult. Depending on the contingencies that are built into the contract there could be opportunities for the seller to back out of the deal.
Sellers may also request a cancellation of the purchase agreement. These contracts can vary from state to state, so it’s important to discuss your options with your real estate agent.
Winning the bid on a house with multiple offers
As a buyer, rejection of your offers for various homes in the market can be demoralizing. You may need to find ways to make your bid irresistible to the sellers. The tips above can help you show that you are willing to go the extra mile to own the property.
Remember to avoid getting lost in the bidding war, spending over your budget, or buying the home out of buyer’s remorse. CrossCountry Mortgage can provide pre-approval underwriting before tabling your offer, increasing your chances of bagging the deal.
Contact us today to learn how we can help you get your bid accepted for homes with multiple offers.