You’ve found the home of your dreams, you put in an offer, and everything’s going according to plan. That is…until you discover a competing offer has been put into the same home. Oh no! You’ve found yourself in what’s known as a bidding war.
How do you win a bidding war when buying a home? There are multiple offers on the home you love, and you no longer have the upper hand. What causes these bidding wars? It’s the perfect combination of a high demand mixed with low housing inventory. Many markets across the U.S. are ripe with bidding wars, and they can be stressful to buyers.
So how do you snag your dream home? You’ll need to be smart about how you approach your bidding war so you can land the home sale of your dreams without blowing your budget. In this guide, we’ll share the top 5 tips on how to win a bidding war when buying a home.
1. Offer a High Price
It goes without saying that the easiest way to win a bidding war is to simply offer the highest price. This list wouldn’t be complete without spelling out this option. Homesellers are always trying to make the most income on their home sale as possible. Offering the highest price is a sure way to land the sale without the drama of a bidding war.
If you’re in a competitive market, you might discover that some buyers are willing to go tens of thousands higher than the asking price to get what they want. If this isn’t an option for your budget, it’s time to consider the strategies below.
2. Cash Is King
Another way to gain an advantage in a bidding war is to flash some cold, hard cash. As the saying goes, cash is king when it comes to sales. If there are multiple offers on a property, all-cash offers are incredibly appealing to home sellers.
What makes cash offers so special? First, who doesn’t prefer cash? Second, it’s like a fast pass through the buying process. Mortgage and agreements are complicated, and they add a lot of time to the home sale. In addition, mortgages sometimes fail unexpectedly, leaving the seller scrambling to pick up the pieces.
If you offer cash, you’re letting the home seller know you’re available to take the home as soon as possible. There are no third-party approvals to consider or hoops to jump through, and that’s important when trying to win a bidding war.
3. Show Your Pre-Approval
Because not everyone can offer an increased offer or pay cash, you might need some other ways to appeal to home buyers. One smart move is to show your mortgage pre-approval from your mortgage lender. This is an approval notice that clearly states you’re able to borrow enough money to purchase the house.
If possible, contact your lender to provide a pre-approval document specifically tailored to the property you’re trying to buy. This is something lenders will draft if you give them prior notice. This shows that you’re serious with your offer and that you’re less likely to experience any slowdowns in the approval process.
4. Put More Money Down
Another option is to put more money down as your downpayment. A higher down payment means you won’t need as much money from the bank, and we’ve already shown why that’s such a good thing when buying a home.
Backing up your down payment with financial proof that you can afford this home is another smart move. It shows that you’re prepared to put more down, and you actually can follow through on what you say. To prove you’re not full of hot air, be prepared to show documents like tax forms, pay stubs, or your 401(k) balance.
5. Waive Your Contingencies
Finally, your contingencies are any requirements that need to be met in order to close on the property. If the seller doesn’t follow through on these requirements, the buyer can back out of the sale. When you waive your contingencies, you’re showing how serious you are about securing this property.
For instance, you might decide to waive contingencies when it comes to the home inspection to continue with the sale no matter what’s discovered about the home. However, as you can imagine, this comes with some level of risk.
If your heart is set on a home, sometimes you have to go the extra mile to show you’re serious about making a purchase. In a perfect world, you’d never find yourself caught in a bidding war. However, if you are, you don’t have to accept defeat.
These 5 strategies above will give you an edge over the other buyers, even if you can’t offer a higher price. It takes some extra thinking to win a bidding war when buying a home. At the end of the day, you’ve got to fight for the house you want or decide to keep looking.