Almost one-in-four—or 23.6 percent—of homes sold in 2017 ended going for more than their asking price, up from 21.8 percent in 2016. This means the market is competitive, because prices tend to escalate when more than one buyer bids on the same home.
Keep in mind, however, that the person who offers the highest price is not always the winner. The process often is more complicated, with an array of strategies to consider from offering all cash to waiving inspection, financing and appraisal contingencies.
Here, Redfin discusses some of the ways to make your offer stand out in a competitive market. Most importantly, always speak with your real estate agent to devise a plan for the home you’ve set your sights on or the seller you’re trying to entice when it comes to winning a bidding war.
An all-cash offer
Offering all cash nearly doubles your chance of having your offer accepted in a competitive situation. In the luxury market, an all-cash offer increases a buyer’s odds of success more than fourfold. The reasons? It ensures a fast and seamless transaction without the involvement of a loan or an appraisal, which sometimes can delay a closing.
However, not everyone has the luxury of making an all-cash offer. That’s where a financing contingency that makes your offer dependent on your loan’s approval can come in handy. Waiving it increases a buyer’s odds of success by 58 percent. It works by making an offer nearly as ready to close as an all-cash offer by guaranteeing that the buyer will come through with the money if their lender doesn’t.
One way buyers who waive their financing contingency reduce their risk of winding up on the hook for the cash is by getting a fully-underwritten loan pre-approval from their lender before they submit their offer.
Often referred to as “love letters,” a personal note from the buyer to the seller is nearly as effective at increasing the odds of bidding war success as cash.
By highlighting shared hobbies or interests, earning a seller’s compassion or trust, and ensuring that the home will be loved and cared for in the years to come. these letters can create a powerful connection between the buyer and seller.
Waiving the inspection contingency and pre-inspection
Doing this simplifies to the process for buyers by reducing the likelihood of requests for repairs or credits. But it’s wise to use this strategy in appropriate situations—like in some of the most competitive situations in which the seller will only seriously consider offers that waive the inspection contingency—and to always consider the associated risks.