Tips for Battling the Bidding War

By
Real Estate Agent with Keller Williams Capital Properties DC AB15253
http://activerain.com/droplet/59dJ

From the buyers’ standpoint, getting into a bidding war for a house they want is never fun. They can end up offering more money than they ever planned to spend, and still end up without the home of their dreams.

A real estate agent should be able to tell you ahead of time if bidding wars are likely in your desired neighborhood. Here are four real estate tips to win a bidding war, if it comes to that:

  1. Make a high offer. Instead of making a low offer with the expectation that you’ll increase it if you have to, offer as much as you can afford immediately. Let the seller know this is your best offer, and that you can’t go any higher. This can help avoid any haggling back and forth, and will save you time and hopefully will get you the house.

A variation of this method includes offering $20,000 or so above the asking price, showing upfront that you’re a serious buyer.

  1. A big down payment: Having a large amount of cash for a down payment of 20 percent or more can show you’re a serious buyer. Get a pre-approval letter from your lender, have paperwork proving you have the money, and pay a higher earnest money deposit if you can.
  1. Go conventional: Instead of getting an FHA or other government-backed loan that can have longer escrow periods, be approved for a conventional loan. This can require coming up with a bigger down payment and having good or excellent credit scores, but can lead to shorter waiting periods and show you’re a strong buyer.

Have the paperwork from your lender available to submit with your offer, such as a pre-approval letter. If you’re offering cash, you’ll also need paperwork to prove you have the money. Having a higher earnest money deposit can also help.

  1. Add an escalation clause. An escalation clause allows your real estate agent to go above the highest offer, but only to a point. For example, on a home with a listing price of $350,000, you could make an offer of $400,000 with an escalation clause of $5,000 over the highest price but only up to $450,000. If another buyer offers $425,000, your automatic clause would increase your offer to $430,000.

However you enter a bidding war, always remember that your exit strategy is pretty simple — there are always other homes on the market waiting for you to buy.

close

Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Dana Hollish Hill 01/07/2018 07:45 PM
  2. Gabe Sanders 01/20/2018 11:50 PM
Topic:
Home Buying
Tags:
bidding wars
advice for buyers

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Rainmaker
193,677
Lisa Perry - NMLS # 276329
FHA, VA, Jumbo, Downpayment Assistance, Conv. - Stafford, VA
Northern VA-80/15/5 100% Loans - Grant Money

Great advise.  I have a buyer, who just lost out on a house because he did not want to go higher on the sales price.  This will be his 3rd contract lost.  

Jan 09, 2018 07:52 AM #41
Rainmaker
325,656
John Wiley
Right Move Real Estate Group- EXP Realty - Fort Myers, FL
Lee County, FL Real Estate GRI, SRES,GREEN,PSA

Great tips and thanks for sharing them.

I agree that keeping the contract as clean and as free of contingencies is very helpful.

I would not be comfortable to advise a client to wave the inspection period.

 

Jan 09, 2018 08:57 AM #42
Rainmaker
2,420,872
Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Great tips for those learning the bidding wars Lise Howe many get lost in the auction mentality and don't win the home.

Jan 09, 2018 11:44 AM #43
Rainmaker
431,900
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Specializing in Brookside, Waldo, Prairie Village

I am hoping the market has calmed down a bit so I dn't have to endure another busy spring and summer dealing with bidding wars!  I am not a fan of escalation clauses--however I know many agents use them.

Jan 09, 2018 01:27 PM #44
Rainmaker
487,091
Karen Feltman
Cedar Rapids/Iowa City, IA Lepic-Kroeger REALTORS - Cedar Rapids, IA
Relocation Specialist

Bidding wars can be very dangerous, especially if agents use escalation clauses and not all parties are informed.  It is a slippery slope.  We need to be fair to all parties.  Great post.

Jan 09, 2018 02:50 PM #45
Rainer
398,492
Dörte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Lise,

Good strategies. & then pray for luck. It is interesting, how things work out sometimes.

Jan 09, 2018 07:21 PM #46
Ambassador
2,437,776
Debe Maxwell, CRS
www.AtHomesCharlotte.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

I totally agree with your strategies, Lise! I have found that being an 'easy' agent to work with has won my clients more bidding wars than their Offers! It REALLY does make a difference - I've been on the receiving side with sellers and when a difficult agent brings an Offer, they never 'shine' as much as the ones that I can say, "Oh, yes, I've worked several times with him in the past - he's fantastic and WILL get his buyers to the Closing table!" They beat the hateful, rude agent's buyers every time! 

Jan 09, 2018 08:42 PM #47
Rainer
17,884
Rita Harris
W.P. & Assoc. - Seattle, WA
Specialty: Immigrant families & vintage homes

Greetings from the Evergreen State and City of Seattle in Particular!

All of your points are quite sound.  However, in a market like fast moving Seattle, if you are a broker with a listing in a desireable neighborhood, you can expect 30 offer, each with escalation, and at least 3 of them will be cash.  I have watched as homes were selling $60,000 over list price (nooooo problem!) and that was at least 2 yrs ago.

For me, I now work as best I can, to find out what the seller needs of a buyer.  If they still reside in the house (few of them do, most are vacant and staged), my clients will offer all sorts of concessions to the SELLER for allowing the buyer to buy the house.  Rent-back for free?  No problem.  Need extra time to empty out the house?  No problem.  Need evidence that the cash is liquid? I can get that in 24-72 hrs.  Waive appraisal or results of inspections?  Can do...

Just this year already, 2 listings were lost because in each case, the sellers came back and said, "I had an all-cash buyer approach me and they just paid cash for my house/condo/loft/houseboat."  Why sell to Conv, FHA or VA when there are ample people using hard money (or loan/coinvestment of parents) to acquire a house, thereby trumping (pardon the pun) anyone else by often LOTS more money than a reasonable offer.  Lost a condo the other day because we went in highest and best, $30k over list, and STILL didn't get it.

We, just like Vancouver Canada, have seen a large influx of foreigners who are not going to be actual residents of the area, or of the homes.  These will remain vacant while the owner will reside elsewhere in the world.  They just paid cash to own a piece of the American Dream and have their cash in US dollars invested.  Yes, translators of various nations ARE required.

As to escalator clauses, in my area they are written by the attornies of the MLS and require everyone to complete correctly so that when you win the bid, you receive a copy of the last highest competing offer and see the terms.

Good luck to everyone in the trenches.  We are just catching up to what Europe has been doing for far more years - pricing as well....

Jan 10, 2018 12:24 AM #48
Rainmaker
1,446,409
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker and Attorney Licensed in DC, MD, VA,

Karen Feltman - interesting comments about escalation clauses - here as the listing agent I would not disclose that some offers have an escalation clause in reviewing the offers in a multiple offer situation

Jan 10, 2018 04:26 AM #49
Rainmaker
1,446,409
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker and Attorney Licensed in DC, MD, VA,

Rita Harris - I really appreciate all the information that you shared in your comment about the Seattle market! It is really helpful to understand how the various parts of the US economy are responding! 

Jan 10, 2018 04:27 AM #50
Rainmaker
140,835
Nogui Aramburo
Linda Craft & Team, REALTORS® - Raleigh, NC
Real Estate Professional in the Raleigh Area

Love the escalation clause, but have a high offer in place already. High offer, conventional loan (strong buyer), high Due Diligence fee. Great post!

Jan 10, 2018 08:44 AM #51
Rainer
167,469
Robert Hicks
United Country River City Realty - Savannah, TN

Bidding Wars???? I could only imagine.. Very interesting, thanks for sharing.. 

Jan 10, 2018 01:09 PM #52
Rainmaker
1,446,409
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker and Attorney Licensed in DC, MD, VA,

Robert Hicks - different parts of the country bring different issues don't they - it keeps us on our toes! 

Jan 10, 2018 01:12 PM #53
Rainmaker
39,795
David Wright
Benchmark Realty, LLC - Brentwood, TN
Real Estate Refined

 very good points you have covered in Multiple Offers. In the Nashville, Brentwood, and Franklin, TN area, Multiple Offers are common. I have heard as many as 20 - to 30 offers on some homes. 

I have participated in many multiple offers both on the buyer and seller side and I have won almost all of my "bidding wars". The first thing to find out is your client up to the challenge and can they handle the emotional ride. Secondly, remove as many contingencies as you can. A clean offer goes a long way.  As they say "Cash is King" holds true in Multiple Offers, but even loans can still win over cash. The key is as a buyer's agent, get to know the listing agent, build rapport and find out as much as you can about the competition. Then bring your negotiation skills into play and try to win for your client.

Representing the seller, I take all the offers and place on a spreadsheet with all important components listed. This makes it so much easier to see which is the best deal for the client, and the top dollar may not necessarily be the best offer for them.

Oh, in the Nashville area, escalation clauses are really frowned on by many brokers. If you use an EC be sure and use a cap. I had one buyer who didn't and I called her about it. She had forgotten all about that element and the deal could have been very painful for her client.

Jan 10, 2018 06:11 PM #54
Rainer
17,884
Rita Harris
W.P. & Assoc. - Seattle, WA
Specialty: Immigrant families & vintage homes

Since it's always so interesting to learn from each other, I am showing you a copy of the MLS form that is used by most of us when presenting an offer in a bidding war.  Perhaps it will help clarify something for those who haven't done bidding wars before... 

Jan 11, 2018 02:14 PM #55
Rainmaker
3,440,886
Joan Cox
Metro Brokers - House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Lise, great tips, and we are again seeing multiple offers here, with very low inventory.

Jan 13, 2018 05:24 AM #56
Rainmaker
4,151,312
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thanks, Lise.  Great tips.

Jan 14, 2018 05:17 AM #57
Rainmaker
550,640
Carla Freund
Keller Williams Preferred Realty - Apex, NC
Raleigh - Cary Triangle Real Estate 919-602-8489

Lise, these are all great suggestions for buyer clients. Another thing we've asked is if the buyer is willing to pay over appraisal value if the appraisal doesn't come in at purchase price. I've asked this on almost all our multiple offers. 

Jan 19, 2018 03:19 PM #58
Rainmaker
2,707,990
Sally K. & David L. Hanson
Keller Williams 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce - Short Sale

We certainly have enough of  those in many parts of our area these days...good heads up to be prepared.

Jan 21, 2018 04:04 AM #59
Rainmaker
221,210
Alberto Pacheco
Home Smart Realty NCG - Northridge, CA
Experience and Trust

Thank your for your bidding war article. I am going to start using scalation clause, it's a great idea.

Thank you for sharing,

 

Alberto Pacheco

Realtor Calbre Lic 01200694

Keller Williams Realty Porter Ranch CA

www.sfvalleyhotproperties.com

www.granadahills.kwrealty.com

Jan 28, 2018 01:57 PM #60
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Lise Howe

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