It's a scenario you were hoping to avoid: After a long search, you finally located the perfect property—only to be outbid by another buyer. Multiple buyers competing for the same property can lead to a bidding war, and buying in a seller's market (where the demand for homes exceeds the available supply) increases the likelihood of getting into one. Let's look at a few strategies that you can use to increase your chances of victory should you find yourself in a bidding war.

Have your pre-approval letter ready

If you qualify, make sure that you have mortgage pre-approval before you start shopping for a home. Unlike pre-qualification, pre-approval offers a precise look at your approved mortgage amount. Essentially, it shows that you've done the work and are serious about purchasing. That may make a seller feel more confident in your offer as opposed to someone whose financing might fall through.

Make the highest offer

It shouldn't come as a surprise that being the highest bidder is the best way to win a bidding war. Just keep in mind that you may need to come up with that extra cash yourself—lenders will typically only finance loans in the amount that the home appraises for, not extra. Also, don't get carried away or throw caution to the wind. Offer more if you can, but don't overextend your budget so much that it puts you in a sticky situation.

Write a personal letter to the seller

Many sellers love the idea of passing their home to a buyer who will love it as much as they do. Writing a personal letter costs nothing, but it can leave a lasting impression. Tell them that you can picture hosting family holidays in the dining room. Talk about why you want to raise your kids in the home. A letter can also give you a chance to explain a low offer, and you never know which seller might sympathize with the costs of childcare, medical bills, or just trying to get started as a young professional couple.

Offer cash

We know this option isn't feasible for everyone, but if you can make a cash offer, that will almost always push your offer to the top of the pile. A cash sale will be appealing to the seller because it lowers the risk that the sale will fall through due to financing issues. It also helps the sale close faster since you're cutting out the middleman (i.e., the lender).  

Drop contingencies

Dropping (or at least negotiating) contingencies can strengthen your offer by allowing the transaction to go quicker and more smoothly for the seller. Nobody wants their house sitting on the market forever, and dropping contingencies from your offer helps the seller avoid those hurdles. However, it's important to keep in mind that dropping contingencies can be a major risk to you as the buyer, so be sure to discuss your plans with your agent first.

Offer a bigger down payment

If you have to finance and can't make an all-cash offer, consider offering a bigger down payment instead—say, 20% instead of 10%. Making a larger payment upfront also means that less financing will be needed from the lender, which can work out if the bidding war increases the overall price of the property. If you try this strategy, make sure you bring documentation proving that you have the resources to back up your plans.  

Include an escalation clause

An escalation clause is an addendum to your purchase offer stating that you're willing to increase your bid if another buyer matches it. This tactic can prove to the seller that you're serious about getting the home. Just be sure that your escalation clause is tailored to fit your plan and budget.  

If you find yourself in the midst of a bidding war, you'll want an experienced real estate agent by your side. Your agent at the Masiello Group can help you navigate the ins and outs of each potential tactic, as well as guide you through the purchasing process in general.

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The Masiello Group is a second-generation family company that has been a trailblazer in New England real estate since 1966. With now more than 35 offices throughout northern New England, we're the largest residential real estate firm north of Boston to offer a complete suite of home services, including buying, selling, mortgage, title, insurance, relocation, and more.

Our agents are eager and excited to meet your real estate needs!

You can find more information on today's market and other real estate trends by reading our blog weekly at https://www.masiello.com/news-and-updates/.