Bidding wars are common in today’s housing market — and they can get heated. Buying a home in today’s market will likely require you to make an offer on more than one home.
Multiple offers are most common among Generation Z and Millennial buyers, ages 18 to 40.
Competing against other buyers can be an emotional experience, especially if you’re doing it for the first time. That’s especially true in a sellers’ market, where there are more buyers than homes listed for sale.
The most important thing? Unless you’re making a cash offer, get pre-approved for a mortgage loan as your first step. An offer backed by a pre-approval letter looks much better to sellers than one without.
The good news is you don’t have to do it alone. A good local agent can help you craft strategies that help you stand out, regardless of the conditions in your market.
If this is your first time buying — or if it’s been a while since you bought a house — here’s an overview of how the process will typically unfold.
how do you make sure your offer is the one the seller can’t refuse?
Keep Your Pre-approval Letter handy
If you’ve heard about the pre-qualification process, note that the pre-qualification is an estimate of the loan amount based on verbal confirmation of your income and other details.
A pre-approval letter, on the other hand, offers a precise mortgage amount based on your W-2s, bank statements, credit score and more official documentation.
A pre-approval letter tells the seller that you’re serious about buying their home. It also tells the seller that you won’t run into trouble getting a mortgage to buy the property. It’s always possible that if you don’t have pre-approval, a seller could skip over your offer entirely.
Put the Best Offer
Traditionally, the best way to win a bidding war is to offer the most money. Although the highest offer isn’t always the one that the seller chooses, money does talk.Bidding wars can get emotional, but you must be able to walk away, secure in the knowledge that a home that fits your budget awaits.
You can ask your real estate agent to get in contact with the seller’s listing agent, who should have some key insights. Your agent can also use local market data to help you strike the perfect balance between saving money and securing your home.
Go easy on the contingencies
Most home purchase offers include a few standard “contingencies” — things that need to happen before the deal can close.
For example, it’s wise to make your offer contingent on a home inspection and your ability to get financing within a specified time.
The transaction should also include an appraisal contingency: If the home’s appraisal doesn’t justify the loan amount, the lender can’t move forward with your loan.
As a rule, however, contingencies are obstacles to successful closings. So keep them to a minimum.
In red-hot housing markets, skip contingencies for non-essential repairs and credits. It doesn’t hurt to ask, but be prepared to waive those contingencies to seal the deal.
Whatever you do, though, don’t waive the home inspection contingency. If you do, and later discover a major defect, you could lose your earnest money deposit if you back out of the deal.
How much do I have to offer as Down Payment on a house?
Your minimum down payment size depends on a lot of variables, including your mortgage type and credit score. Homebuyers who get VA loans or USDA loans can usually buy a home with no money down.
An FHA loan requires at least 3.5% down, assuming your credit score is at least 580. Conventional loans need at least 3% down, but you’d need a stronger credit profile to qualify.
Make an offer on a house the right way
Don’t let a preventable mistake keep you from buying your dream house.
Research the market, know your budget, and make sure you have all the information you need to make a winning offer.
Most importantly, get pre-approved for financing. Your offer will look a lot better to the seller with proof in-hand that you can afford the home. You can start the mortgage pre-approval process right here.