So you’ve found the perfect house. It’s the right size, has everything you’ve been looking for, and you can picture your family living inside. But there’s one issue standing between you and your dream house — another offer.
After learning there are multiple offers on a house, you might think the odds are stacked against you, and you might even consider throwing in the towel and starting your search over. But if you're in love with a house and you know it’s the right home for your family, don't be afraid of a little competition. With strategies below, you can give buyers a run for their money and come out on top.
Here’s how to win a bidding war when buying a house.
1. Get a Mortgage Pre-Qualification Letter
You don’t have to be pre-qualified by a mortgage lender before bidding on a house, but it certainly helps. A pre-qualification involves going through the loan application process. The lender checks your credit and income, and lets you know how much you can afford to spend on a property.
Some buyers submit a bid, wait for the seller to accept, and then shop for a mortgage. This can work. Just know that if you're not pre-qualified, some buyers won’t take your bid seriously. Or if they have to choose between you and a bidder who has financing, the seller may feel it’s safer to go with the pre-qualified candidate.
But don’t just get pre-qualified, ask your realtor to notify the seller’s realtor of your qualification status, and include a copy of your pre-qualification letter with your bid.
2. Don’t Ask for Too Much
Understandably, you prefer houses that are in good condition and move-in ready. The less you have to do updating the property, the better. Realize, however, that if you’re buying a resale, you're not going to like every single thing about the house.
You might find a house that’s in good condition and meets your needs, yet you feel the bathrooms and kitchen need to be updated to match your style. Or maybe the house has carpet, but you prefer hardwood floors. You can request these changes when submitting your bid, but the seller might laugh in your face.
Asking a seller to fix or replace broken items is completely reasonable and justified. But if you start demanding too much and nitpicking the property, the seller might not entertain your offer and go with another bidder. Rule of thumb: Buy new construction if you want a house that’s perfect and built to your specifications.
3. Pay Your Own Closing Costs
Some sellers pay all or a percentage of a buyer’s closing costs. This is a major perk for buyers. But if you’re competing with another bidder, you can get on the seller’s good side by agreeing to pay your own closing costs. Closing costs, also called settlement fees, average between 2% to 5% of the sale price and include a variety of mortgage-related fees, according to Zillow.
4. Up Your Offer
You might look to pay as little as possible when buying a home. But this plan can go out the window when a property has a lot of interest. Your realtor will stay in close communication with the seller’s realtor, so you’ll learn about multiple offers, and you’ll have an opportunity to increase your offer.
To make it easier, put an escalation clause in your bid. Include how much you want to pay for the house, and mention that you’re willing to increase your offer (up to a certain amount) if the seller receives a higher offer. With this clause, your bid increases in increments of your choice. For example, if you submit an offer to purchase a home for $200,000, you can include an escalation clause that increases your bid in $2,000 increments up to $215,000. This little trick keeps you a step ahead of the competition and helps you win the war.
5. Be Ready to Close
Some sellers are eager to move and they don’t want to wait 30 to 45 days to close on the sale. This is especially true when they need to immediately relocate for work or other reasons. If you're competing with another bidder, you can move your bid to the top of the pile by being flexible and ready to close. So if a competing bidder needs 30 days to close, the seller might go with your offer if you can close in two weeks.