Pro Tip: How to win a bidding war
How to win a bidding war when you want to buy a home.
You found it. The perfect house. You visualized it, you knew it was out there, and the moment you walked in the front door it hit you. This, right here, is the home you were waiting for. Your face is a picture of blissed out future happiness and then you look to the right…and the couple next to you is wearing the exact same look. Oh hell no. Game on.
Welcome to the Denver seller’s market and the most competitive sport in town, the bidding war. What’s a bidding war? It’s when two or more buyers offer more than list price to compete for a single property on the market. Additionally, there may even be some back and forth among competing buyers as the offered price is raised and buyers throw in extras for the sellers such as money towards low appraisals, limited or waived inspections and the opportunity for rent-backs (sellers staying in their house after closing and renting from the new buyer until it’s convenient for them to move out).
While sellers absolutely dig this, it can be super scary and frustrating for buyers. The objective is clear, but the rules seem everchanging. You want to win, of course, but at what cost?
No problem, we got you! If this is the Olympics of home buying then our training system is a proven path to gold. We utilize a very specific strategy to win you your dream home:
Know exactly what the seller wants
Know exactly what you want
Be relentless and charming
That’s the gist. Grab a coffee and we’ll take you through the nitty gritty!
STEP 1: Know exactly what the seller wants
We’ve all heard the phrase “Knowledge is power,” and it has never been more fitting. Knowledge of sellers’ needs is your superpower in this game. A strategically won bidding war is not accomplished by just throwing money at a house, even though offering money intelligently is an important part of it. You should be able to rely on your agent to contact the listing agent and gather vital information on what is most important to the seller.
And what do sellers need? Perhaps they want a fast close because they’ve already bought a new home, so your “30 days or less” guarantee will speak to them. But if they are waiting for a home to be built and you blindly offer a fast close, then you could end up at the bottom of the offer pile regardless of how much money you offered. In this case, you would have done better to offer a competitive rent-back perk. Your agent should work with you to determine if you are personally and financially able to act as temporary landlords to your sellers until it’s convenient for them to leave. What if offering the sellers a free month in their home only costs you a few thousand dollars but the sheer thoughtfulness and convenience pushes your killer offer right to the top? This is the kind of thinking that wins homes.
Another strategy could be to offer an appraisal guarantee. An offer of $20K over asking with an appraisal guarantee (you’ll pay $20K above asking regardless of the final appraisal value) is worth more than $35K over asking with no appraisal guarantee. Why? Your guarantee lowers the risk that sellers will lose money if the house appraises lower than the amount you offered.
What if you’re in an extremely hot part of town, where houses don’t even last a day on the market? Maybe you go all in and limit inspections or your right to an inspection objection in your offer. Wait, what? Shouldn’t you always get a home inspected before you buy it? Yes, we adamantly believe so. You can still get a house inspected but also limit or remove your right to exit the contract based on what you find. This is not for everyone and is only used as a tactic in very specific situations, but it can be a really useful tool in your arsenal to win.
Interesting, right? Who knew? (We did.) The big thing to remember though is that all of these tactics are situation-specific. Frank discussions between your agent and the listing agent will result in gathering the information you need so that you and your agent can craft the perfect offer. And guess what? Many agents don’t bother to do this work! When acting as listing agents, we constantly receive offers from people who never called to find out what our sellers wanted. Those people don’t win because they didn’t know what to offer. Because of this, an expert agent can up your odds of winning a home before cost even comes into play.
STEP 2: Know exactly what you want
Okay, this seems like a “no duh.” But it can be really tough to remember your priorities in the heat of the moment when stakes are high and you’re worried that the market is passing you by! We want to protect you from getting so caught up in the fear of losing a potential home that you throw more at it than you should.
Before you even start looking, we’ll map a general idea of what you’re looking for in a home, what you’re financially and personally comfortable with, and your own timeline and needs. This will guide our search and help us in the bidding process. Then when we find a home you love, and before we craft our offer, you’ll want to take a moment and step back. Trust us here. There is time to breathe. Look at your preliminary plan. Talk with a partner, spouse, or trusted friend. Make sure that this home checks all your boxes and you aren’t buying out of a fear of missing out. Giving up on that second bathroom may not seem like such a big deal now, but does it mean that you’ll hate the house by next year and be back on the market? If the seller wants to rent back for two months, how does that affect you and your family? Does a higher offer push your monthly payments past the point of feasibility? Also, consider external factors like the cost of continuing your search while both home prices and interest rates are trending up. Think about what your top offer could buy now, versus what that same money may or may not be able to purchase in six months.
If you emerge from this time-out knowing that this is the home for you, then we’re in it to win it! Talk with your agent about your top price and the combination of concessions you are willing to make based on your detailed knowledge of the sellers’ needs. This is the time to dig deep and come out of the gate with your absolute best and final offer. If you wait to see what others are offering before you sweeten the pot, you’ll lose the house to someone who played it safe the previous round, lost a home, and won’t make that same mistake again! By putting your all on the table, you’ll either win your home without compromising your financial ideals, or you’ll be outbid but know that you didn’t make a play that you’d regret every time you paid your mortgage.
STEP 3: Be relentless and charming
Don’t worry, this first bit about being relentless is 100% your agent’s job. This doesn’t mean irritating the agent or sellers, but it does mean keeping in very consistent communication with the listing agent. We like to call it “pleasantly relentless.” A solid buying agent will gently but consistently remind the listing agent that your offer is on the table and ensure that should anything change with the offer situation, you have all the information to respond. A buyer’s agent needs to check in regularly with the listing agent and not passively wait for any information to find its way to her.
As for being charming, we’ll both need to bring our A-game!
First, your buyer’s agent. Listing agents have more influence than you’d imagine when helping their sellers navigate offers and decide on a final choice. Sellers often rely on their agents to guide them to the offer with the best benefits and least risk. Listing agents want to get the best for their sellers, and this includes not only the offer but the closing experience as well. This means that they care about the agent on the other side of the deal. They want to work with someone who will make their jobs easy. Don’t we all? It is worth your time to make sure that your buyer’s agent can talk with you about how she connects with the listing agent and how she will present you to the sellers and their agent in a way that makes your whole team look like the easy and pleasant choice. Once you’ve determined that your potential buyer’s agent is an expert, ask yourself how you’d feel about spending an afternoon together. If you want to run for the hills, so will the sellers’ agent! But if you feel like you’d be friends even if you weren’t working together then you’ve found the golden ticket.
Now for your part. Yep, you want the sellers to love you as much as you love their home. This really is the secret sauce: connect personally with the seller. Your agent will help you find an appropriate way to communicate with the sellers about how much you love the house and want it to be yours without making you seem weird/creepy/stalker-esque. Do not underestimate the power of this moment! Many, many, manybidding wars have been won by our clients, even when they offered less money and concessions because the sellers appreciated how much our buyer cared about the house they were selling. Remember that the seller once fell in love with this home just like you did, made it their own, and created memories there. You share this connection. It is, other than the price, the most powerful tool in winning the war.
See? It’s not so complicated. Nothing is scary or impossible with expert help. You may be a novice, but Dwell has been to the bidding wars many times and can help you craft your winning offer and emerge victoriously. Let’s get you into your next home!
Ready to win a bidding war?
