In the competitive world of real estate, it is imperative to be creative and flexible when presenting your offer to purchase a property from a seller. As we are heading into the summer season, there is generally more activity in the real estate market. With market factors such as more buyers entering the market, lower interest rates and less inventory, having a meticulous and competitive bidding strategy plan can assist you in being triumphant in acquiring the home of your dreams.
Below are strategies you can implement to win a bidding war on a property:
1. Present an offer with no contingencies
A contingency refers to a clause in a purchase agreement specifying an action or requirement that must be met for the contract to become legally binding. Contingencies are conditions that must be met for the sale to proceed, such as obtaining financing, satisfactory home inspections, or selling an existing property. These contingencies protect buyers by providing an exit strategy if certain conditions aren’t met. Both the buyer and seller must agree to the terms of each contingency and sign the contract before it becomes binding. When you submit an offer without contingencies, you signal to the seller that you are fully committed and ready to close the deal swiftly and smoothly. This can make your offer significantly more attractive compared to others that might be higher in price but loaded with conditions that could delay or derail the sale.
2. Offer a larger down payment and earnest money deposit
Increasing your down payment shows the seller that you are financially secure and serious about purchasing the property. Lenders are more likely to approve loans for buyers who can contribute a higher percentage of the home's purchase price upfront. Earnest money deposit is a sum of money you put down to demonstrate your commitment to buying the property – it’s a good faith gesture. It’s a sign of your sincerity and confidence in proceeding with the purchase. If you should back out of the deal without a valid reason, the seller typically keeps this deposit, which provides them with a form of security. This strategy can make your offer more competitive.
3. Add an escalation clause
An escalation clause allows you to match and offer more money than the highest bid until a certain maximum price. It’s a strategic move to outbid competitors without grossly overpaying from the outset. You can specify the amount by which you’re willing to outbid competing offers until you reach the maximum price you are willing to spend.
4. Waive the appraisal contingency
An appraisal contingency allows homebuyers to back out of their purchase contract if a home is appraised for less than the purchase price included in the contract. If the appraisal is lower than the offer price, the appraisal contingency allows the buyer to: renegotiate the price with the seller; pay the difference out of pocket; or walk away from the deal without losing their earnest money deposit. Waiving this contingency presents a stronger and more competitive offer and reduces the seller's risk.
5. Present an all-cash offer
You have heard the term “Cash is King.” In real estate, it is the best option a buyer can offer a seller. In the high-stakes environment of a bidding war, presenting an all-cash offer can be a game-changer. An all-cash offer negates the necessity of a buyer to rely on mortgage financing, has a faster closing process, provides a stronger negotiating position when compared to other competing offers, and waves the appraisal contingency which mortgage lenders require. This strategy can significantly increase your chances of winning the bid for a property.
6. Hire a dedicated, knowledgeable and savvy real estate agent
Hiring an impactful and knowledgeable real estate agent can significantly enhance your chances of winning a bidding war. A skillful real estate agent understands macro and micro market dynamics and has access to market data. A real estate agent can communicate effectively in negotiations with the seller’s agent/seller and navigate counteroffers strategically. Real estate agents have access to off-market listings - homes for sale that may not be advertised, and have a broad network which can lead to opportunities not publicly accessible. A successful agent does not drop the ball, and pushes transactions through efficiently and effectively. Agents coordinates with all parties involved in the transaction, including mortgage lenders, attorneys, inspectors, and HOA or Co-op boards, to ensure a smooth and timely process. Real estate agents also provide emotional support and guidance. Purchasing property can be a challenging experience. Agents offer an objective perspective to their clients and make the purchasing process as stress-free as possible. By leveraging a real estate agent’s expertise and resources, a buyer can navigate a bidding war with greater confidence and success. (Shameless Plug: Please feel free to contact me, LaShawn Freeman, for all of your real estate needs in New York, nationally, and globally!)
7. Offer concessions to the seller
A concession is an incentive or discount offered during a real estate transaction. Providing concessions to a seller can make your offer more attractive, even if the offer price isn't the highest. Concessions examples include offering to pay a portion or all of the seller's closing costs; accepting the home 'as-is' and waive the right to ask for repairs; waiving contingencies, such as inspection or financing; and allowing the seller to remain in the home after closing for a set period of time rent-free. By addressing the seller’s specific needs and easing their burden, you can make your offer more appealing and increase your chances of securing the property.
8. Make the highest offer
Making the highest offer sets you apart from other buyers bidding on a property. It’s highly attractive to the seller, eliminates prolonged negotiations and counteroffers, and outcompetes other incentives other buyers may use to persuade a seller to accept their offer. Using this strategy can potentially assist you in securing a property before other bidders have a chance to respond.
9. Skip the inspection
Skipping a home inspection is a bold move, signaling your commitment and willingness to proceed with the purchase of a property without negotiating repairs or price reductions based on the inspection results. An inspection can delay the sale or lead to renegotiations. Waiving the home inspection can speed up the transaction process, thereby scheduling an earlier closing date. It reassures the seller that you’re committed to buying the house as-is, with or without any defects.
10. Be quick and flexible
Being quick and flexible demonstrates your eagerness and ability to meet the seller’s needs, which can make your offer more attractive. Ways to be quick and flexible include already being pre-approved for a mortgage and having your financial documents in order to secure a loan with a lender quickly. Touring a new listing as soon as it hits the market, having your real estate agent submit your offer immediately, limiting contingencies and having a flexible closing date are also effective methods.
I hope this article has been helpful as you embark on your search for your dream home. Please feel free to contact me if you should have any questions. Be sure to follow me on Instagram and TikTok at @Keys2Memories for the latest real estate news and helpful tips. And, please feel free to share this article!
LaShawn Freeman, Douglas Elliman Real Estate Agent
Unlocking new memories, one door at a time.
M: 917.254.3313 / E: lashawn.freeman@elliman.com
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