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How to win a bidding war on a house

Jenny Rose Spaudo  —  March 5, 2022

Here are 9 ways to make your offer irresistible and win a bidding war on a house.

If you’re looking for a new home in a seller’s market, you’ll likely encounter several bidding wars. When the competition is particularly strong, how do you make your offer stand out from the rest? Here are nine effective ways to strengthen your offer and win a bidding war on a house you love. 

1. Bid above asking price

The most obvious way to make your bid more competitive is by offering more money than anyone else. Your real estate agent can help you determine how high you should go.

But in a strong seller’s market, it’s fairly common for buyers to bid above the listing price. If you’re trying to win a house that has multiple offers above the asking price, don’t give up. There are several other ways to craft a compelling offer. 

2. Get preapproved for a mortgage loan

Some sellers won’t even entertain a buyer’s offer if they’re not preapproved for a loan. They don’t want to sign a contract only to see the buyer’s financing fall through a month later.

Go the extra mile and get a preapproval letter from your mortgage lender. This shows the seller that your offer is serious and that your financing is stable.

3. Make an offer that’s competitive with cash

Removing the financing contingency entirely is another way to strengthen your competitive edge and win a bidding war on a house. Sellers typically love cash offers because they tend to close more quickly and are less likely to fall through. (In fact, the National Realtor Association reports that 23% of existing-home sales in 2021 were purchased using cash!) After all, most lenders require certain contingencies that make deals harder to close.

If you don’t have enough cash for a house and don’t want to liquidize valuable assets, you can still make a non-contingent offer. Beat out other buyers with a reliable program like the Knock Bridge Loan™ if you’re buying and selling.

4. Waive the home inspection

Usually, buyers include a contingency in their offer that allows them to back out of the contract if the home inspection reveals any major issues. Home inspections are important because they can reveal hidden problems with the house—problems the sellers may not have even known about.

But if you’re willing to take the risk or pay for any necessary repairs or replacements in order to win a bidding war on a house, you may want to waive the home inspection contingency. Before you do that, though, make sure you walk through the home to check the following:

  • Walls and ceilings: Look for cracks, mold, and water damage.
  • Appliances: This includes the oven, refrigerator, dishwasher, and laundry machines.
  • Electrical systems: Test light fixtures, fans, outlets, and breakers.
  • Plumbing: You can’t look at the pipes, but be sure to test all faucets and sinks, showers, bathtubs, toilets, and the water heater.
  • HVAC: Turn on the air conditioning and the heater to make sure they work and aren’t leaking.
  • Outside structure: Check the roof, gutters, eaves, draining systems, fencing, external siding, pool, and water pumps.

5. Offer an appraisal gap guarantee

If you take out a traditional mortgage, your lender will most likely require a home appraisal. This means you would have to include a contingency that lets you and the lender back out of the deal if the appraisal puts the home’s value below the purchase price. If that happens, the seller loses precious time and money.

You can solve this problem and give the seller peace of mind by offering to cover any potential appraisal gap. You can do this safely with appraisal protection when you use the Knock Bridge Loan™. But you should always consult your licensed real estate agent or your Knock Loan Advisor first.

6. Add an escalation clause

If you’re one of the first people to bid on a house, you run the risk of someone outbidding you later. Avoid this by adding an escalation clause to your offer. This automatically increases your offer up to a certain amount if someone else bids higher, meaning it could help you be the winner in the bidding war on the house you love. 

For example, let’s say you find a home with an asking price of $250,000. You decide to offer the asking price but include an escalation clause that says you’re willing to outbid any other offer by $1,000—but only up to $275,000. If someone later bids $275,000, then you officially bow out of the bidding war.

7. Cover extra closing costs

If you want to win a bidding war on a house, consider offering to cover some of the seller’s fees. Usually, sellers pay around 7% to 10% of the purchase price in closing costs, which often include:

  • Real estate agent commissions (around 6%)
  • Property taxes and HOA fees
  • Transfer taxes (for the county and city)
  • Title fees
  • Attorney or broker fees

When you offer to pay for some of those expenses, the seller keeps more of the proceeds from the sale, which is what makes this bidding strategy so effective.

8. Let the seller decide the closing date

Typically, the closing period for a home lasts 30 to 45 days. But if the seller needs to move out sooner because they’ve already purchased another home, offer to move up the closing date.

On the other hand, if the seller needs to stay a few months longer than usual while they search for another home, you have two options:

1) Move the closing date as far out as they need.

2) Offer a rent-back clause, which allows them to rent the home from you for a certain period after the closing date.

9. Offer a higher earnest money deposit

Earnest money is a deposit buyers give in good faith. At closing, that money goes toward the down payment. If the deal falls through because of the buyer, the seller can keep the earnest money.

Usually, this deposit is 1% to 5% of the total purchase price. But in a competitive market, consider offering as much as 10% for your earnest money deposit.

By using one or more of these strategies, you’re one step closer to winning your next real estate bidding war!

Knock Lending LLC
309 East Paces Ferry Rd NE, Suite 400. Atlanta, GA 30305
(866) 996-1695

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