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Bidding wars may have cooled but they’re still a factor for many homeowners due to the low number of homes on the market. According to the National Association of REALTORS (NAR), homes averaged 3.3 offers in May 2023 and listed properties typically stayed on the market for just 18 days. If you’re among those battling for a house, here are six tips that may help you win a bidding war.
1. Submit a Verified Approval Letter with your bid
Verified Approval Letters help buyers show they’re serious bidders. These letters are a step above Pre-Approval Letters which state how much a lender may approve you for on a mortgage. That’s because Verified Approval letters are only provided after an underwriter has verified information such as your income and assets. With this in hand, sellers may be more confident in your offer than another’s whose financing might fall through.
You may also consider getting Verified Approved for a bigger loan than you need if you haven’t already, as you’ll see in tip number 2.
2. Have extra cash on hand
Bidding wars often make houses sell for well above their asking price. As The Balance explains, this may make a home’s selling price more than what your lender’s appraiser supports. That said, you may need funds on hand to pay the difference between the two. If this strategy isn’t ideal, you could alternatively shop for homes that are under budget, so you have wiggle room when negotiating.
Speaking of cash, a 100% cash offer may also help you win a bidding war. It may give sellers added trust that you’ll close on time because your financing won’t be an issue. This option carries risks, however, if you take shortcuts such as skipping an appraisal, survey, or home inspection that a lender would require. Steps like these can ensure a home isn’t overpriced or in need of expensive repairs that could hurt its value, for example.
3. Have a guaranteed closing date
A third strategy is to use a lender who offers a closing guarantee. Guarantees like these can give both buyers and sellers added confidence in a bid. Take note that not all closing guarantees are created equal. Some mortgage companies will only pay you a flat fee if your mortgage isn’t approved by your contract closing date.
4. Be negotiable with contingencies
Contingencies are clauses buyers often add to contracts to protect themselves, but these can be hurdles for sellers. They can include stipulations that repairs must be made or that a home has to close on a particular day. You may stand out from the crowd if you’re flexible with these during a bidding war on a house. If you delay a closing date in a hot market, for example, sellers may respond favorably. You’ll be giving them more time to find their next home in the same tough market.
Discuss the pros and cons of dropping any contingency with your real estate agent as skipping them could hurt you. For example, some homebuyers waived home inspection contingencies during the competitive 2022 homebuying season. But, NAR reported that many buyers also regretted dropping inspections.
5. Add a time limit to your bid
This tip may help you avoid a bidding war altogether. In the hot pandemic housing market, Boston-area real estate agent Elias Papdopolous suggested finding a house that has just hit the market and giving sellers 4 to 6 hours to accept a strong offer. If your bid is too good to lose, a seller may accept it without waiting to hear from competitors.
Bear in mind that your real estate market may vary from Papdopolous’. In a 2020 interview with Boston.com, he advised that buyers should consult their agents for best recommendations on time limits.
6. Offer more earnest money
Many sources say that offering earnest money is a potential way to win a bidding war. If you’re not familiar with earnest money, it’s basically a deposit you put down on a house. Offering more money can be appealing because, under the right terms, the seller may be able to keep the deposit if the deal falls through. It may also signal that you’re a more serious buyer than your competition.
A note about buyer “love letters”
Some sources will say writing a “love letter”—or personal appeal—to sellers is a way to win a bidding war. However, many experts such as NAR warn against them. That’s due to the fact that love letters risk violating local, state, or federal fair housing laws. For example, under the federal Fair Housing Act, sellers can’t discriminate based on a number of factors, including a buyer’s race, religion, or familial status. If you write, “this house would be perfect for my family,” or include a picture of them, you’re revealing a key detail.
Whatever your bidding war strategy, discuss it with your real estate agent. With the right guidance, you may win the war—and a great house—while staying on budget.
Tradenames and trademarks used in this blog post are the property of their respective owners. Nationstar Mortgage LLC d/b/a Mr. Cooper is not affiliated, associated, or sponsored by any of these owners. Use of these names and trademarks is not intended to and does not imply endorsement, but is for identification purposes only. Information provided does not necessarily represent the views of Mr. Cooper. Information is subject to change without notice.
