How to Compete in a Home Purchase Bidding War

Does it feel like every home you put an offer on has multiple offers and you find yourself in a bidding war?

Buying a home is one of the most important and emotional decisions a person or family makes during their lifetime.  The current environment of lack of supply and favorable loan terms has created a tremendous amount of competition for most homes that hit the market and you need to be armed with how to compete in a home purchase bidding war.

Buyers are getting so emotional and competitive in a home purchase now that a lot of buyers are coming in with very short inspection periods, very short closing timing, no loan conditions and all cash.

"The number of homes for sale fell to a 13-year low in January, which leaves would-be buyers chasing a shrinking supply of homes just before the spring selling season."

Here are some tips to help ease the stress level and help you compete for your next dream home:

1. Remain Calm

Don't spend more than you can actually afford.  Buyers can get caught up in the hype, and that can mean spending too much.  Buy a home that you can visualize living in and creating memories in.  Do not buy your home for merely investment purposes.  It will likely increase in value over time as most real estate does, but trying to compete for a home based solely on your desire to profit from the home is not a home purchase but an investment.

2. Make Your Offer Stand Out.

Remain calm, but be realistic, too. When bidding on a home with multiple offers, you need your offer to stand out.  While that doesn’t necessarily mean overpaying, if it's the right house for you then when you look back five years from now, you're not going to care about that extra $5,000 you “overpaid” in order to get it.  A lot of sellers do care who they sell their home to.  We recommend to our clients to attach a cover letter describing what you like about the home, how your kids really loved the backyard and the play room area, etc.  Make the seller feel good about how their home looks and feels and tug at their heart strings a bit.

3. Check Your Credit.

Before setting foot in an open house or lender's office, check your credit.  If you see anything that doesn't appear correct or needs updating, then a good time to make those changes is before you're in the process.

4. Get Loan Preapproval.

In competitive markets, buyers need a lender's preapproval in hand before looking at homes. And be prepared for a stringent underwriting process.  This is different than a prequalification letter which is merely a statement by a lender that you could qualify for a loan of some amount but the lender has not reviewed any of your financial information.  A preapproval letter is a statement by a lender that based on a review of your financials and credit history you will likely qualify for a loan of a certain amount. 

5. Bring a Larger Down Payment.

If possible, bringing more than 20% to the table will help your offer remain competitive and set you apart from the others. 

6. Be Nice and Courteous.

If you're competing for a house with other buyers, stand out by making life a little easier for the seller. For example, be flexible about the closing date to allow them time to find a new home or be willing to rent the home back to them for a month for the same reason.

7. Find a Good Agent.

An experienced real-estate agent may alert you to homes before they come on the market which will lessen the chance of a multiple offer situation. Plus, if your agent is an expert in a certain area and well respected by their peers, that can help you stand out with the seller's agent.

The tips above will help you be confident in putting your best foot forward to compete in a home purchase bidding war.

How to Compete in a Home Purchase Bidding War