If you’re shopping in a competitive market, you may find bidding wars are more common than not. But while it may seem as if all-cash offers win every time, there are a few ways you can make yourself a more appealing candidate — without rolling up to the open house with a suitcase full of Benjamins.
Use these tips to learn how to become the most desirable buyer you can be, the kind that wins the multiple-offer war.
1. Get preapproved
OK, this one isn’t sexy. But it does make a difference. Securing mortgage preapproval shows sellers that a lender has verified your income and credit score and determined that you can afford payments on a mortgage for a certain amount.
2. Have at least a 20% down payment
Investors who are snapping up homes to flip or rent usually come to the table with cash. And sellers love all-cash offers because they’re (seemingly) less likely to fall through before the sale closes. An all-cash offer is rarely possible for the average homebuyer — but if you can sweeten the deal with a hefty down payment, you may be more appealing to some sellers.
3. Have all your paperwork in order
You know that flaky, disorganized friend who always forgets when you’ve made plans and somehow always leaves their wallet at home? Don’t be that person.
When submitting your offer, show that you are serious by documenting your proof of funds and where your cash is coming from (along with that all-important preapproval letter) and any other paperwork that your real estate agent suggests you have on hand. An organized, competent buyer who can quickly prove their ability to purchase may just win out over other offers.
4. Forget lowball offers
You may have only one shot to get it right, so when you find a home that appeals to you, make your best offer. Hint: It’s the price you’re willing and able to pay.
Be sure to base your offer on recent sale prices of comparable properties in the neighborhood so that it will pass muster when the property is appraised. If you hold back, thinking you’ll sweeten the deal with a higher offer on the second try, you may lose the property to another buyer.
5. Keep contingencies reasonable
Some people advise prospective buyers to drop all contingencies. Not so fast — this is potentially a very bad move. While most sellers prefer offers with no contingencies, you probably can’t afford to forgo the protection that contingencies provide if you decide to cancel the contract.
Instead, offset a financing contingency with preapproval and a strong earnest money deposit. Include a home-inspection contingency, but tell sellers you will get it done within seven to 10 days (at the most). That way, if the price tag on those repairs gets out of hand, you can back out of the deal but not tie up the property for too long.
6. Include an escalator clause
The escalator clause is a technique in which you agree to increase your offer if there’s a higher bid from another buyer. This way, you can write into the contract that you will automatically offer $1,000 or $5,000 or $10,000 more than the highest offer submitted.
While it’s a good way to ensure that you’re not outbid by a nominal amount, make sure you and your agent create a cap on that total amount — or you could be in for sticker shock.
7. Write a love letter to the sellers
She suggests including key points such as: “We’re relocating from …,” “We see ourselves living in your neighborhood or chose your schools because …,” “We especially love …,” and “We appreciate your accommodating our visits.”
Stand out even more with an offbeat letter that points to why you’re the unique and ideal new owner for their home.
8. Find out the sellers’ timeline (and offer to meet it)
Express your willingness to work with the sellers’ timetable. If the sellers want to remain in the home for a while after closing, offer them a “lease-back,” which means they can stay in their home until they’re ready to move and you will be their temporary landlord. This is a legal arrangement, and you’ll need to work out the details with your agents and be sure that the sellers keep their homeowners’ insurance during their stay.
If you are bidding on a short sale, make clear to the sellers that you are patient and can wait for the bank’s decision. If the seller is downsizing, offer to purchase furniture or appliances in the home that meet your aesthetic.
What do you think makes a buyer appealing to sellers in a competitive market? Share your tips on how to win a bidding war in the comments below.