Y’all…it’s a fast paced and competitive market out there. Does it feel like every time you find the “house of your dreams” you can’t seem to move quick enough to make it your own? A house goes on the market and within a day it can have multiple offers on it or even worse…we could be faced with the dreaded BIDDING War! Well, have no fear. I am going to share with you 8 tips on how to keep your sanity and win the house bidding war in this crazy market!
Tip #1 – You have to be QUICK!
If you have looked at any houses in the last several months, you know this is no time creep like a snail. When you find a house, you must move fast. Showing appointments fill up fast! Reach out to your trusted real estate agent and ask them to schedule an appointment to see the house as soon as possible. Once you see the house, you also want to make a quick decision about making an offer. The majority of listed houses in this fast-paced market are moving at lightning speed. Agents are asking for all offers to be submitted within days of the first day the house is on the market. Long gone are the days when you could think about the house for a few days, take your time to crunch the numbers, or even go and see it a second time. What a luxury! You need to stay on top of the inventory, stay on top of the market, and make sure your schedule is open so that you can go and see homes quickly.
Tip #2 – Make sure you are PRE-APPROVED to purchase a house, not just pre-qualified.
There is a big difference. Some people use the terms interchangeably, but there are some important differences that every homebuyer should understand. Pre-qualifying is the first step in getting a mortgage. It gives you an idea of how large a loan you’ll likely qualify for. Pre-approval is the second step, which is a conditional commitment to grant you the mortgage. In the current market, agents are asking for a pre-approval letter from your lender up front. Sellers want to know that you are qualified financially to purchase their house. They don’t want to waste their time even considering an offer if you can not prove that you are financially sound buyers. Work with a trusted lender that will help you write strong terms and can close quickly. Being Pre-approved will give the sellers certainty and confidence that you are less likely to fall out of the contract because of financial reasons.
Tip #3 – Have your agent reach out to the seller’s agent and gather some information.
The seller’s agent is under no obligation to tell your agent anything about the current offers that are on the table. We have no idea what the other offers look like. Are they for all cash? What is the due diligence period? Are they for over list price? If so, how much over? We usually don’t know any of that information. Our job, as your agent, is to make sure that your offer is the strongest and best that it can possibly be. When I represent a client, I always reach out to the seller’s agent to see what they ARE willing to share. Just last week I reached out to an agent who told me exactly what the highest bid was! It was hugely helpful to know what I needed to offer and I wouldn’t have known if I hadn’t called the other agent. In other situations, there might be a specific closing date that the seller needs. Or maybe they want to close really fast because the house is vacant. I want to find out what is important to the seller. What will make our offer stand out? We can use all of this information to our advantage to win the bidding war when we submit our offer to the seller.
Tip #4 – Do not come in with a low-price offer.
You need to be aggressive. If you are putting in an offer in a today’s market, keep in mind that your dream house is not going to sell for under the list price. If you are adamant about putting in a low offer, you are almost guaranteed to not win the bidding war. This is where your knowledgeable real estate agent will come in super handy. If they know the market and know what houses are going for, they can guide you as to what you should be offering on the house. And here’s another tip….It may be a good idea to be looking at houses that are 20 to 30 thousand under your budget since houses are tending to go over list price. This will give you some wiggle room in your offer price. When you do find a great house that fits your needs, you need to come in strong from the get go to make your offer stand out!
Tip #5 – You can choose to waive the appraisal.
I don’t suggest this option for everyone. Because there is so much demand and very little supply, prices are being driven up and homes are often selling for way over list price. So, there is obviously a concern that the house will not appraise for the contract price. For example, if a house is listed for $600,000 and it sells for $650,000, you need to make sure it will appraise for $650,000. But what happens when it doesn’t? If you are paying cash, it’s not an issue. If you are taking out a loan, your lender will require you to have the house appraised. The term “waive the appraisal” does not mean you won’t be getting an appraisal done. You are saying that if the appraisal were to come back lower than the sales price, you are willing and able to make up the difference in cash. This means that when you agreed to buy a house for $650,000 and the appraisal came back at $630,000, you will come to the table with $20,000 in cash to cover the difference in sales price and appraisal. This extra money is in excess of the down payment! If you choose this option, you need to make sure you have extra cash to put towards the appraisal gap. If you don’t want to take the full risk of putting up the entire amount, you can always have your agent write in the initial offer that you are willing to put up to a certain amount towards the difference in the appraisal. For example, you could say you would be willing to pay $10,000 towards the gap in the appraisal amount. So, if you bought the house for $650,000 and it appraised for $630,000, then you would be paying $640,000 and the seller would be willing to come down to $640,000 for the final sales price.
Tip #6 – Agree to take the property “As Is”.
This is another strategy that may not be for everyone. You can still have an inspection on the house, and I certainly recommend that, but this tells the sellers that you are not going to nickel and dime them on every little item that shows up in the inspection. I recommend buying the house as-is for buyers who have owned homes before and who are handy or for those homeowners who are already planning to do major renovations. If you are new to buying a house or buying a house as-is makes your stomach turn, there is another way to communicate you aren’t going to ask for tiny repairs. You can set a limit on inspection repairs. What this means is that you choose an amount of money, let’s say $4,000. Once the inspection comes back, you agree that you are not going to ask for any repairs UNLESS the cost of the suggested repairs exceeds the $4,000 threshold. This communicates you aren’t going to ask for every $50 or $100 repair, but do reserve the right to discuss any large ticket items that might show up.
Tip #7 – Think about adding an escalation clause.
An escalation clause is a stipulation that states the buyer is willing to raise their offer on a home if the seller receives a higher competing offer. The clause will state how much more the buyer is willing to pay than the highest offer. Escalation clauses offer buyers protection if other potential buyers outbid them in the bidding war. In general, an escalation clause can show the seller how serious a buyer is about a property and how far they are willing to go to win the home. In most cases, an escalation clause will have a cap of how much the buyer is willing to spend to beat the other offer. So, if you don’t want to go above $550,000 on a house that is listed for $520,000, the escalation clause would be capped at $550,000. An escalation clause moves in increments set by the buyers up to a set maximum price. For example, let’s say you offer $500,000 on a home and set an escalation increment to $1,000. If someone offers $510,000, your offer automatically goes to $511,000. If you set an escalation cap of $520k, you can have peace of mind that you won’t be paying more than that amount. Just remember that if someone else offers $520,100, you will lose the price bidding war. Your agent can help you figure out the best way to go about creating an escalation clause.
Tip #8 – Offer an option payment for the due diligence period.
Let’s first talk about what a due diligence period is. A due diligence period is a period of time (usually a 1-3 days in this market) that the seller is granting the buyer the option to terminate the contract for any reason at all. In a nut shell, nothing in the contract as a whole is enforceable until we get past this due diligence period. An option payment is additional money that goes from the buyer to the seller to pay for the right to have that due diligence period. It’s not part of your earnest money and it is completely non-refundable. Let me say that again….it is non-refundable. It may or may not be applied to the purchase price of the home. It is very important to understand that you will not get this money back unless it is eventually applied to the purchase price. For example, you could offer the seller $4,000 as an option payment for a 10-day due diligence period. If you decide at any point during those 10 days that you don’t want the house, you can back out of the contract and still receive your earnest money back. However, the $4,000 now belongs to the seller. This could be one option to entice the sellers to choose your offer over someone else’s in this competitive market.
There you have it. Eight tips on how to win a house bidding war. I hope these tips help you to win your next bid. Reach out to us with any questions on these tips. We know it is confusing and we are here to help!
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The HĀVN Group with Keller Williams Chattahoochee North is a team of REALTORS® serving metro Atlanta. We help home buyers who are relocating to our beautiful city and suburbs and guide sellers in selling their homes for the most amount of money with the least amount of stress.
Tracey Scholen is the team leader of The HĀVN Group. She is the proud wife of a husband who can fix anything! When not selling real estate, you can find her swinging a tennis racket, drinking a London Fog (ask for this secret drink at Starbucks!), or chauffeuring her 3 girls around town.
Bianca Giddens has lived in the Atlanta area for over 20 years. She loves playing tennis and watching college football with her husband and 3 sons.
Meg Sams learned to see the beauty and potential in structures of all shapes and sizes, growing up with an architect mom and engineer dad. When not spending time with her artist husband, Roy, and her busy boys, Meg loves playing tennis and sticking her toes in the sand.
If you want to talk to us about moving to the Atlanta, Georgia area, we would love to chat! Feel free to contact me:
Tracey Scholen
📧 [email protected]
☎️ 404-274-4514
We are REALTORS® at Keller Williams Chattahoochee North, located at 3390 East Jones Bridge Rd. #100 Peachtree Corners, GA 30092. We are licensed to sell real estate in the state of Georgia.
