Given how hot the housing market is right now, it’s not surprising that bidding wars are becoming more and more common.
Currently, the number of homes for sale is lower than normal and more and more buyers are looking to buy before mortgage rates rise any higher. Now, just how fierce are these bidding wars getting? Listed homes are receiving an average of 4.8 offers per sale nationwide, says the latest report from the National Association of Realtors (NAR).
Curious to see what that means for your state? Let’s see the breakdown below
These bidding wars are happening on more than one front, reveals the NAR report, as typical buyers make two offers before having their third one accepted. When a housing market is this competitive, knowing how to get a leg up on that competition can make all the difference in finding your new home.
Ultimately a real estate professional is the best ship for navigating these often choppy wars. Still, there are a few important strategies to weigh as you set out.
Make An Offer Over Their Asking Price
The first way many home buyers think of impressing a seller is to make an offer right at the home’s asking price. By not negotiating and not bartering, this can seem like a strong move. It’s also better than bidding too low, given that many homes are actually selling for over their asking price. This is common in markets where there are more buyers than available homes.
What to consider in this situation is making an offer that is within your budget and within reason for the area’s market value. Making this assessment is easier with a local real estate professional. This is seconded by Bankrate’s advice for home bidding wars:
“Simply put, being willing to pay more money than other buyers is one of the best ways to get your offer accepted. You may not have to increase it by a lot — it’ll depend on the area and other factors — so look to your real estate agent for guidance.”
Put Down A Larger Earnest Money Deposit
Another way to potentially win a bidding war on a home is to put down a larger upfront deposit. This is known as an earnest money deposit, which is a check that you submit alongside your offer. Should your offer be accepted, that deposit will be credited to the home purchase. Take a look at this NerdWallet explanation to see how it works:
“A typical earnest money deposit is 1% to 2% of the home’s purchase price, but the amount varies by location. A higher earnest money deposit may catch a seller’s attention in a hot housing market.”
This is an effective strategy because the seller will see from the money that’s been set aside that you are both interested in the house and ready to purchase. To see if this is a strategy you can implement where you’re buying a home, check with a local real estate professional.
Make A Higher Down Payment
There are several benefits to increasing your down payment. One advantage of a higher down payment is that it reduces how much financing you’ll need – and how much you’ll pay for your mortgage on a monthly basis.
It also sends a message to the seller that the deal is less risky and less reliant on financing. Plus, if the other bids for the home include less down, your offer will stand out.
Improving Your Offer Through Non-Financial Options
Given that home buying and selling is a primarily financial transaction, the financial portions do carry weight. That said, you do have additional options. Realtor.com shares a number of non-financial options, like:
“. . . Price is not the only factor sellers weigh when they look at offers. The buyer’s terms and contingencies are also taken into account, as well as pre-approval letters, appraisal requirements, and the closing time the buyer is asking for.”
Additional non-financial levers to consider for your bid include flexible move-in dates or minimal contingencies. These are the conditions that buyers set that must be met before the purchase is finalized.
As an example, some buyers might make an offer contingent on the sale of their current home. By leaving these minimal contingencies out, or at least reducing them, you can improve your position.
Don’t forget that there are a number of contingencies you should not forego, including the home inspection.
This is another area where a real estate professional’s input is especially valued, especially since there is so much variation state-to-state. When you’re ready to make an offer, their insights into the local market and seller behaviors can help you decide which of the above strategies are right for you.
How To Put Together Your Winning Home Bid
In a hot housing market where sellers are receiving nearly 5 bids and buyers are making an average of 3, nailing your offer is increasingly important.
Having a local real estate professional as your guide is an invaluable resource. With their insight, you’ll be sure your offer is as strong as possible for your situation and your local area so you can find your new home.