How To Win A Bidding War On Your Dream Home In 2022
After years of saving, months of searching, and dozens of offers, you’ve finally found the perfect home for you. It has the location, the style, and the space you’ve been dreaming of; the only problem? Other buyers love it, too, so much you’re in the throes of a bidding war. Yikes. A bidding war may make you fear going far and above your budget, but it doesn’t have to mean stretching your budget thin. There are many ways to win a bidding war that doesn’t include forking over the most cash. Keep reading to learn the best strategies.
How To Win A Bidding War Without Going Broke
Consider An Escalation Clause
If you suspect that your dream home is popular with buyers, you may want to consider an escalation clause. If you aren’t sure how much other buyers will offer, your real estate agent can write an escalation clause into your offer that says you’ll pay a certain amount above other offers up to a set limit. You could, for example, offer $1,000 over the highest offer, which isn’t an excessive amount but may snag you the home.
If you can’t afford an escalation clause and still want to compete with other buyers, it’s time to get creative. You may be able to tip the scales in your direction by including a personal letter to the seller with your offer. A personal note can consist of a few details about yourself and your family in the opening body of your letter. You can write about the property details you love and why you want to buy their home. If your offer is low, explain your circumstances. Perhaps you’re a first-time homebuyer, have children in daycare, or are just married. Many sellers will empathize and choose an offer with a personal letter that resonates with them.
Remember Cash Is King
Even if your offer isn’t the highest in a bidding war, you may still reign supreme if you have cash on hand. If you don’t need to apply for a mortgage, your offer will stand out because a seller doesn’t need to worry about problems with financing. Ultimately, a cash sale saves time for everyone and can close much sooner because there’s no underwriting process to wait on. A cash offer will always be king if a seller is looking to move quickly.
Offer contingencies are specific conditions that must be met before the deal can be completed. For example, some offers are contingent on selling a buyer’s current home or an appraisal. While most lenders and the VA require appraisal contingencies, you can offer to pay an additional amount in cash at closing to make up for a home appraising for less than the agreed-upon price. You can pay $__X__ amount extra to pad the low appraisal. This allows you to stand out from other buyers and pay more upfront.
Skip The Inspection
Many offers also include a contingency that says you can cancel the sale if a home inspection shows problems with the property. Although you can make your offer stronger by agreeing to skip the inspection contingency, it’s not always the best idea. Some issues are too big to ignore, like cracked foundations, black mold, or a leaky roof.
If you want to go this route, ask for an "informational inspection" rather than an "inspection contingency" in your offer. This language lets the seller know you won’t be asking them to pay for issues it may uncover.
Put More Down
Putting up a larger down payment may mean saving up longer before buying a home but seeing more cash upfront can be attractive to sellers. It feels like more money in their pockets right away, signaling that your financing is solid and the deal will close. While you don’t have to put down the complete 20%, an offer with a 3% down payment may not stand up against bids with 10% down.
Find Out Which VA Loan Works Best For You
VA Loans are available exclusively to veterans and military families in America. There are many different loan types available to you. Once you know more about the process and the loan best suited for your needs, we can help guide you through the rest of your home buying journey.
Learn more about VA loans here.