The Art of (a Bidding) War
Even in a balanced real estate market, competition between eager bidders may arise—so how do you make your offer truly stand out among the rest? A strong price is an obvious tactic, but there are a few other tricks of the trade that can make your offer the bright, shiny object that’s hard for any seller to resist.
Dates and Deadlines
Whether it’s a quick close, an extended occupancy, or any other scheduling requirement, sellers often have their eye on a specific closing date—and if you can meet that date, your flexibility may be as good as a higher-priced offer. For example, some sellers put a premium on a post-closing occupancy situation. If the sellers need to stay in the house past the closing date—and this agreement works for you—your willingness may be more enticing to the seller than cold, hard cash.
Additional Earnest Money
While it’s a simple notion, it’s one many buyers don’t consider: offering extra earnest money. Not only does it show your enthusiasm, it indicates you’ve got plenty of cash on hand, which may alleviate concerns the sellers have about your financial qualifications.
Contingency Removals
Inspections, appraisals, and loan conditions: these are the three big hurdles that must be cleared during the purchasing process. If you can remove one or all of these, it strengthens your offer significantly.
First, let’s talk about the biggie: the inspection. As a general rule, removing the inspection clause from an offer isn’t recommended—imagine, your worst nightmare would be to discover a faulty HVAC system, a leaky roof, or an unknown foundation issue post-closing. But occasionally, this contingency can be waived. If you’re confident about the condition of the home, you can still request an inspection, letting the seller know you’re only inspecting it for your personal knowledge and you don’t expect to renegotiate the offer.
The appraisal can be handled several ways. If you’re not concerned about the home meeting the appraised value—or you’ve got enough cash on hand to bring a larger down payment to the table—by all means, remove the appraisal contingency. If you’re limited on your down payment, you can still offer that you won’t object to the appraisal, as long as it meets a certain threshold. This method works well for both buyer and seller, while providing a safety net should the house appraise significantly lower than expected.
Lastly, while they’re good for buyer protection, loan conditions are a potential red flag for sellers. Under these conditions, buyers are protected from unforeseen financial circumstances. However, because they’re often scheduled near closing, sellers can see them as a threat and potential time-waster if the deal falls through. If you’re extremely comfortable with your finances—and you’ve been thoroughly vetted by a lender—removing this obstacle makes your offer as good as cash.
Escalation Clause
I mentioned it before: a strong price is the primary driving force behind a strong offer. Even when you’re confident with your own offer, you can’t be sure how it’ll stand up to others. (Cue the Vegas-level nerves!)
A contractual trend that’s on the rise is an escalation clause. Here, the buyer makes an offer, but also agrees to beat any offers by a certain amount up to a maximum price. It’s a savvy strategy that shows the seller’s strong interest, but it’s important to stay within your budget—and your lane—and know when to walk away if the bid goes beyond your limit. A basic example would be, “Buyer is willing to pay $500,000 or $5,000 over any competing offer up to $525,000”. These clauses always require that the competing offer be presented to the escalating buyer, with personal details redacted.
More than any clause or contingency, though, the best decision you can make is to hire an experienced real estate agent to guide you through the buying process. Having an advocate who knows the local market inside and out—and who can advise you on tough negotiations—means you’ve got a well-stocked arsenal to enter the bidding war.