How to avoid a bidding war when buying a house: this was a common question during the red-hot seller’s market. They are also STILL the top reason why prospective homebuyers can’t get the home they want even as the market cools.
Due to still-low inventory, competition remains in select markets. If you have your eye on a desirable property, the chances are high that others notice its value too. Buyers in the starter home bracket especially feel the pinch as interest rates rise. If you need to buy a new home in this market, how do you ensure that nobody else’s offer wins?
To avoid a bidding war, make the seller forget about any other offer. When your offer stands out from the rest, they won’t care about what else is coming their way. The easiest way to avoid a bidding war is to pay the asking price or slightly above it with all cash. However, this is a tall order for the regular home buyer that typically needs financing. So, how do you make sure you can avoid the stress of bidding against others and losing out? Let’s find out.
Steps on How to Avoid a Bidding War When Buying a House
A full cash offer at the asking price is the golden ticket to a quick acceptance. In a seller’s market, this kind of offer takes away a lot of doubts and expedites the buying process, which is attractive to sellers. You can also play with this option if the market is in the buyer’s favor. For example, an all-cash offer slightly lower than the asking price can be accepted by a seller who needs to move quickly and not wait on a financing contingency.
Include as Few Contingencies as Possible
Speaking of contingencies, anything extra on your contract that says the deal depends on a particular factor can be a liability to a seller. Their real estate agent will advise them to accept the cleanest and least complicated contract that promises the best outcome for the seller.
This means that whatever gets the seller the most money, whether by eliminating a home inspection contingency, financing contingency, appraisal, or home sale contingency, can make it a great deal for a seller. After all, not having to make repairs because there’s no inspection is music to the listing agent’s ears.
However, as interest rates rise, fewer buyers take the risk of not having an inspection. Another option could be a void-only inspection contingency. If the problems are too big for the buyer to manage, they can gracefully bow out without losing their earnest money deposit. If the sale proceeds after the inspection, then the seller won’t need to make repairs.
- Note: Speaking of contingencies, we offer incredible special incentive programs that obliterate home sale contingencies that often hold buyers back. Ask us how we can help you tap into equity early to make an impressive down payment and remove that pesky home sale contingency from your offer.
Look for Off-Market Properties or New Builds
Another excellent way to avoid a bidding war is to look where others aren’t looking. If you have the inside scoop on off-market properties, you can make an offer even before it goes on the market. This gives you a chance to shine before any competition emerges.
You can also buy a new construction home. This option ensures you can get the house where you want it, and you can even choose the floorplan and materials you want. We also offer special incentive programs like Guaranteed Lease, where you can turn your old home into rental income, freeing you to buy a new construction home from one of our builder partners.
If you’re like the majority of buyers that can’t pay all cash for a property, you still have many options. Your first step is to prove your financial fitness by getting a pre-qualification letter from your lender. This document assures that you can handle payments for a house within a certain price bracket.
Attaching this letter to your offer raises a seller’s confidence and makes it easier for your financing to be improved within the 30 to 45-day homebuying timeline. Buyers with no qualification letter will delay the home selling process by having to go through their lender and get qualified after they make an offer.
Offer Rent Back
Sometimes, sellers have a complicated timeline and feel stressed about moving immediately. They will be more inclined to accept your offer when you offer rent back, especially a free rent-back period. This enables them to move at their own timeline even after the closing day. Such flexibility gives the seller confidence to move on their terms, which may give you an edge over another offer that doesn’t offer the same perk.
Insert an Escalation Clause
An escalation clause is a contract addendum that says that if any other offers have a higher price than your offer, you can match it or beat it by a certain increment. This is an attractive clause because you can automatically meet or beat it – even if someone comes in with a higher number. If your other contract terms are favorable, you can avoid the competition and be picked first.
- Tip: You may be able to avoid the escalation clause altogether and offer your highest and best first. However, this tactic may not be necessary for a market that is cooling, and buyers have more leverage. Consult your real estate agent to see if this is even necessary. Also, be sure to cap your top dollar offer, or you may be stuck with a contract price that’s too high for your liking.
Look Outside the Hot Spots
Sometimes, the best way to avoid a bidding war is to avoid the competition. If you don’t mind driving extra or accepting a property that may not be right next to everything you need, you may find some hidden gems still in your preferred zone.
A house slightly outside of the suburbs or in a less popular neighborhood will get fewer offers, but it could also have a lower listing price. If you are okay with moving slightly outside your ideal, you can find a useful and valuable property – and you don’t have to go into the fray for it.
- Tip: If you have your heart set on the perfect location, check for houses that have been on the market for a while. Anything over 30 to 60 days is prime material for giving an offer at market price or even slightly below the asking price in a buyer’s market. Keep your eyes peeled for the deals, and let your real estate agent know when you want to make an offer.
Learn How to Avoid a Bidding War When Buying A House
When you work with an experienced real estate agent from Marketplace Homes, you can get expert insights into off-market properties from our investors and new builds from our builder partners. Contact us to learn more about rising above the bidding wars.
Local Broker Information: https://www.marketplacehomes.com/real-estate-license-information/