When buying a home in a competitive market like the one in Hampton Roads, how can you win the bid on a house with multiple offers? If you’ve found your dream home, make sure your offer wins the 2023 bidding war with these tips for crafting the perfect offer.
If you’re struggling to develop a successful offer on a residential property in a seller’s market, you’re not alone. Multiple offer situations are fairly common - especially in high-demand markets, and even more so for first-time homebuyers who need housing in 2023.
But even inexperienced buyers can win a bidding war on the perfect house and not break the bank using some of this professional wisdom.
Access the Best Home Search Tools
(by working with an licensed professional)
Before going into the search, it’s important to make sure you know what you’re looking for in a home. What are your negotiables and non-negotiables? Are you willing to put in some work? Have you spoken to a lender about your absolute top-line budget? What school district is best for your family?
But here is why it’s critical to work with a real estate professional when buying a home: only a licensed broker or agent can give you direct access to your local MLS feed.
A multiple listing service (MLS) is where the most accurate and up-to-date information about any listing will be found. And if everyone with MLS access views the home before you, it will be hard for you to make a competitive and attractive early offer. The best real estate agents will set you up with an MLS auto-search that notifies you immediately when a house with your criteria hits your market.
(By the way - CGP has one for Hampton Roads that allows you to search the MLS for free.)
Another bonus of working with a professional: brokers such as at CGP can show you properties within hours of listing. Their inside scoop on what’s going on and off the market can give you the upper edge you need to snag your perfect home.
Be Prepared to Act
Maybe you’ve lost out on a few bids already, or keep finding the perfect homes on Zillow that are “Under Contract”. The good thing is, you’ve explored a few homes now, and you know what you are looking for. Your motivation is an asset!
It’s crucial in a strong seller’s market to be ready to go see properties that match your criteria. Do what you can to arrange to with work and other commitments that will allow you to look at properties as quickly as possible. Make sure all documents - including proof of funds - are ready to deliver if needed. A mere 24 hours can be the difference between winning and missing out on a home.
In a busy market environment, it’s usually impossible to put a list of 3-5 properties together, visit them all, and take your time with a decision. It’s important to be watchful and go see properties as soon as they hit the MLS.
And you don’t just want to be ready to view the home - be prepared to make an offer as well. Make sure you’ve spoken with a loan officer and know all the details of what you can afford. Then you’ll be ready to act as soon as you fall in love with the place.
Working with a real estate professional really is advantageous, as he or she can typically get you access to the property more quickly than you could on your own.
Start with a Competitive Offer
(especially if you expect multiple offers)
When you’re ready to buy, understanding the current housing market is key. If you’re actively concerned about running into multiple offers, it’s probably a strong market where demand is high and supply is lower. Smart sellers will have done their research, and they will know if you haven’t done yours.
When demand for homes is inflated, don’t rely on there being wiggle room to negotiate the price with the seller. Though it may be tempting to make an offer that is $10,000 under the asking price because you want a good deal, this won’t make a positive impression with the seller in an active market.
With multiple offers, the home seller will be most concerned about the guaranteed net dollar amount they’ll get in the end. Plan ahead with your budget so you can avoid asking the seller to pay for things like your closing costs or any type of minor up-front repairs.
Consult with your real estate professional about the fair market value of a property as soon as you see the listing.
Creative Ways to Craft a Competitive Offer
It’s still possible to lose out on a property even after making a strong offer that pays full price, covers your own closing costs, and finishes closing quickly. To go above and beyond a clean full price offer, you might need to get creative to finally land that home. Here are a few tips to help your offer stand out from the rest.
Keys to making a competitive offer on a home:
Don’t underbid. Put your best foot (and best offer) forward from the start on a well-priced property.
Pay your own closing costs. It’s all about the seller’s net gain in the end, so plan to cover your own closing costs.
Pay a portion or all of the seller's closing costs. By offering to also cover a portion of the seller's closing costs, you'll incentivize them to choose your offer while avoiding having to guarantee cash over the appraisal value (which, if you are buying with a VA Loan, you can't do).
Close quickly. Unless the listing agent has disclosed the seller’s desired sale date, agree to close on the property as quickly as possible. Within 30 days is a good target.
Avoid contingencies. When possible, avoid making your offer contingent such as things like your current home selling or someone else in your family seeing the property. (A benefit for first-time homebuyers - they usually don’t have contingencies to work around!) Here's how home sale contingencies work.
Increase your earnest money deposit to show you are serious. When buyers are bidding for homes, the amount of money you agree to place in escrow to guarantee your investment in the house can go a long way. Show the seller that you are serious about purchasing their property by increasing the amount that you put up as earnest money once your offer is accepted.
Assure the seller you won’t ask for repairs. Agree to purchase the property as-is. Making an offer contingent on a home inspection is a must usually for the savvy buyer. But you can guarantee that you won’t ask the seller to make any repairs from the home inspection if they accept your offer.
Include a Purchase Price Escalation Addendum. When submitting your offer, consider including an escalation clause stating that you want to automatically increase your offer if someone outbids you (up to a certain amount). It would look something like this: “My offer is currently $275,000, and I will pay $1000 more than any other offer up to $305,000.”
Be a little unconventional with your bid. We love this story by our founder, Scott Westfall: I once had a client bid just $10 over the asking price of a property. Three other offers came in at full price. The owners thought our bid was hilarious and totally gutsy, so they accepted it with a huge smile!
See it from the seller's point of view: Using a simple net proceeds calculator in Excel will help you better understand the sellers point of view. Tools like this can also allow you to play around with different variables in your offer to ensure your offer provides the seller with the highest net amount at closing.
Want more tips & ideas on how to make your next offer on a home the last offer you make? Make sure you’re subscribed to our newsletter for confident investors, or give us a call.
BONUS: When should I make an offer over the listed price?
It’s important to note that the highest price doesn’t always mean it’s the best offer.
In a competitive market, it only makes sense to go above the asking price if you can guarantee that you can make up in cash any difference between the appraisal price and the purchase price. Banks won’t lend a buyer more money than the home appraises for. For your high offer to carry weight, you’ll need to prove that you can pay the difference between the appraisal price and the offer.
But take note: Those using a VA Loan may not be able to guarantee in their offer that they'll use cash to cover the cost over the appraised value. If you are a VA buyer and want to guarantee any gap in appraisal value, we recommend that you talk with your lender!
If a seller accepts a higher offer without a guarantee of cash for the difference, they could be forced to lower the sales price so that your financing is approved. Rather than trust your high offer without a guarantee of cash, they could likely be drawn toward another full-price offer with no contingencies, closing costs, or potential financing issues.
However, if you absolutely need closing assistance but don’t want to lose out on a house, there may still be hope. While often it would be a long-shot, increasing your offer over the list price to compensate the owner for helping to cover closing costs could allow them to walk away with the money they were aiming for.
In the end, a full-price offer that takes care of closing costs and doesn’t have contingencies can end up being stronger than an offer that is $25,000 over the asking price.
THE BOTTOM LINE
Working with an experienced broker like CGP is key to your success when buying a home in a competitive housing market such as in Hampton Roads’. Make sure to have your who knows how to position your offer to stand out above the rest. It is the subtle details within an offer coupled with integrity, hard work, communication and professionalism of your agent; that can make the difference between you getting the home of your dreams or narrowly missing out.
With these tips, you can win a bidding war on a house with multiple offers in 2023.
Looking for more insights on the 2023 housing market in Hampton Roads? Check out our 2023 Housing Market Forecast.