Facing a Bidding War on Your Dream Home?

Despite setbacks from the COVID-19 pandemic, the real estate market has remained strong in many areas, with demand for homes often exceeding inventory. This can lead to bidding wars, in which multiple buyers compete for a home by making increasingly higher offers. While a bidding war is the ideal situation for sellers, it can be disheartening as a buyer to find your dream home—only to risk losing it to another buyer with a stronger offer.

If you find yourself embroiled in a bidding war when purchasing a home, here are a few strategies that may help you triumph over your competitors

- Get pre-approved for a mortgage. By having a pre-approval letter handy to show that you are qualified for a mortgage loan, you’ll be able to assure sellers that there won’t be any delays to closing the sale due to your finances. You could even have your lender write a specific pre-approval letter for the home on which you are making an offer to show that you are ready and able to buy.

- Offer a bigger down payment or more earnest money. While raising your overall offer price will certainly give you an edge over other buyers, simply increasing the amount of your down payment or earnest money deposit will also help show the seller that you are serious. Additionally, your lender won’t need to approve you for a higher loan amount if you put more money down.

- Consider waiving contingencies. Contingencies offer important protection because they allow you to walk away from the sale or renegotiate price if the inspection reveals significant issues with the home, or if a discrepancy in value affects your mortgage loan. When facing a bidding war, however, you might consider waiving these contingencies—but be aware that this is a risky move and it’s probably best to consult your realtor first.  

Sources: realtor.com & redfin.com