The Dos and Don’ts of Real Estate Bidding Wars
These days it seems that homes sell as soon as they hit the market, despite lofty price tags and plenty of competition among buyers. Would-be homeowners who find themselves in a bidding war would be wise to heed our experts' advice.
Real estate seems out of control as of late. In an ultra-hot real estate market, homes are being sold for as much as six figures over the asking price. When the housing market is this aggressive, knowing the ins and outs of real estate bidding wars can help you make an offer a seller won’t refuse.
Start with a real estate agent who’s an expert in your local market and prioritizes finding your home over pressuring you to spend money. The right agent can provide insight to the nuances of your location, ensuring your bids are competitive without overspending.
Here’s what to do—and what not to do—if you want to win a bid on your future home.
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DO give your best offer.
In a real estate bidding war, agents will advise you to come in with your best and final offer. It’s unlikely that a seller will negotiate when other offers are on the table. Make sure your bid is the highest you can go, and be okay with losing if the home sells for a dollar more than your offer. You won’t find out the costs of the other bids, but the sale price will be made available once the deal closes.
DON’T put too much weight on a list price.
Just because the list price is in your budget doesn’t mean the selling price will be. Nationwide, buyers pay 1 to 3 percent over list price on average. That doesn’t account for cities like Seattle or Austin, though, where every home receives an incredible response from prospective buyers once it enters the market.
According to Linda Baddour of Bramlett Residential Real Estate, the company’s data shows bids that are 15 to 16 percent over list price have been winning in their Texas region. But with the ebb and flow of the market, these numbers can change.
DO be prepared to waive contingencies.
When competition is fierce in real estate, you will likely have to go into a deal with very few or zero contingencies, or caveats that enable you to back out of a deal without breaching contract.
Your competitive offer might mean waiving things like a home inspection, house sale contingency, and more. Problems with a new house are less likely, but an older property might require some work that a home inspection would normally reveal. If you’re aware of the possibilities before waiving contingencies from the outset, you’ll be more emotionally, mentally, and financially prepared before making your offer.
DON’T assume the highest bid will win.
Yes, you need to come in with a strong offer, but sellers might want more than just a high-dollar number. Fast closing and possession, few contingencies, a free leaseback term, a short option period, or even a personal letter to the seller (the lattermost of which may or may not be read) can make a buyer stand out. As long as you offer a competitive amount, these extras might seal the deal.
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DO try to time your bid.
There is no universally perfect time to make a bid on real estate, according to Brad Pauly of Pauly Presley Realty, who says each deal has its own unique circumstances. Typically, though, a listing hits the market on a Thursday or Friday, viewings happen through the weekend, and all offers have to be in by a specified time on Monday.
Pauly explains the seller has the right to take any offer at any time, even before the Monday deadline—so it helps to know if they’re motivated to move fast. Some listing agents offer more information than others, which helps buyers’ agents advise their clients on the best time to make a bid.
DON’T forget to do your research.
If a home seems too good to be true in this market, it probably isn’t worth bidding on. You likely recognize the trends of how square footage, age, dwelling type, and more factors affect listing prices if you’ve been paying attention to local real estate. When you notice a listing that doesn’t fit the going market rate, there’s usually a reason for it: cosmetic fixes, suspicious history, or additions that aren’t up to code. No matter how much you want to buy a home, make sure you’re bidding on one that’s safe and meets your needs.
DO hang in there.
The current real estate landscape can feel very discouraging. Buyers can expect to spend a lot of time looking at listings, rushing to viewings, and becoming invested in a property just to lose it in a bidding war.
Your agent will help you understand how close your offers are to the winning bids, and you can use that information to help you in your search. Keep at it and eventually things will work out, but it may help to take a short break from looking if you need it. When you return to the search, don’t give up hope that the home you end up in will be the best fit for you.