If you’ve submitted an offer on a home for sale, you may now find yourself in a bidding war with other buyers — especially in a seller’s market like we’re experiencing today. When there is limited inventory and lots of demand, odds are that the seller will have loads of offers to choose from. It’s at this point that rather than giving up on your dream home, you may opt to adjust your offer by making the terms more seller-friendly or by increasing how much you’re willing to pay.
Aside from the tips we offered when submitting your original offer — like having a pre-approval letter, removing contingencies, or making a large down payment — there are several other tactics we’ll discuss below to give you the best chance of having your offer selected.
Have a game plan ready
If you really love the home, come up with a plan when submitting an offer about how far you’re willing to go and what seller’s concessions you’ll give up if you do enter a bidding war. You should try to make your first offer your best offer, but there’s always some wiggle room, especially if you had to make an offer incredibly quickly and didn’t have much of a chance to think things through. While the seller is reviewing initial offers, discuss next steps with your real estate agent and whoever you may be purchasing the home with.
Add an escalation clause to your offer
One way to offer a higher price for a home without fear of unnecessarily overpaying is to add an escalation clause to your offer. Essentially, this clause increases your offer to a certain amount over other offers up to a certain price. For example, you may offer $200,000 with an escalation clause that says you’ll pay $1,000 over every other offer submitted up to $220,000. If the highest bidder offered $210,000, that means your offer would be bumped to $211,000 at your same terms. This is especially useful if your loan allows you to offer a low down payment, which can sometimes make your offer less desirable to a seller.
Write a letter to the seller
Many buyers and their agents like to write a personal letter to the seller, including touching stories about their family and maybe even a photo. While opinions vary on this tactic, it may appeal to the emotions of the seller and be just enough to set your offer apart from a buyer they may suspect will turn their dear home into a rental property, or worse.
Just like submitting your initial offer, being ready and available is key to winning a bidding war. Make sure the seller knows they can contact you or your agent at any time with questions about your offer.
If a seller does contact you, make any decisions and respond quickly. A seller may get frustrated if they have to wait until the end of your work day for a response and move on to another buyer. If you don’t have a flexible job with access to your cell phone during the day, consider discussing responses to common scenarios with your agent so they can respond on your behalf.
Know when to walk away
In the midst of a bidding war, it can be easy to get emotionally attached to a home. But, it’s important not to throw your budget out the window. Instead, think realistically about how much you can afford — closing costs included — and stick to this range. The last thing you want is to get drawn into a bidding war, pay too much for a home, and have that home turn into a stressful burden that you can’t offload for what you paid for it.