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House bidding war rules can trip up even the savviest home buyer. Sure, you’re ready to buy, but so is someone else. So what do you do?

Whether you’re interested in how to win a bidding war on a house or handle multiple offers on your home, this guide has you covered. But before you learn about house bidding war rules, you need to understand how bidding wars work and why they happen.

What Is a House Bidding War?

A house bidding war happens when two or more parties compete to buy the same house. Each party attempts to present the most attractive offer, usually highlighting a price they think will be the highest.

How Do Bidding Wars Work?

Bidding wars start when multiple buyers submit competitive offers simultaneously — particularly if more than one bidder includes an escalation clause. In bidding wars, escalation clauses tell the seller you’ll outbid a competing offer by a certain amount. 

For example, suppose you submit a bid for $200,000. In that case, your escalation clause might say you would outbid the competition by $2,000 up to a certain maximum.

Multiple escalation clauses usually result in a bidding war. Sellers may also start bidding wars by informing competing buyers of other bids, encouraging those bidders to submit higher offers. 

However, a bidding war starts, it will only end when one party concedes and the seller accepts the competing offer. 

How To Avoid a House Bidding War

Bidding wars can be costly and nerve-wracking for buyers. To avoid this stressful process, make your strongest offer as soon as possible.

If you’re prepared to bid up to a certain amount, offer that amount initially. Maximize your down payment and submit proof of funds, showing you have that money in your account. A higher down payment shows you as a more reliable buyer.

Your agent may offer additional tips based on the demand in your market. 

How To Win a Bidding War on Your House

Bidding wars are most common when a market has more buyers than comparable properties. If there aren’t many houses for sale in your area, especially in your home’s price range, you’re more likely to have a bidding war.

The more interest you have before your house goes on the market, the more likely you are to start a bidding war. Begin by hiring a qualified real estate agent and talk with them about marketing strategies — how to price your home and where to list it, for example.

One effective strategy is to list your home before you start showing it. If you wait a few days between the listing and the first showing, you’ll increase demand before people bid. 

Delaying offers can make this strategy even more potent. For instance, you could start showings on a Friday and only accept bids on the following Tuesday, giving potential buyers more time to prepare attractive offers. You’re likely to collect more offers at once, setting the stage for a bidding war.

The Ground Rules for House Bidding Wars

House bidding wars are competitive, but they’re not free-for-alls. Here’s how to bid on a house reasonably, even when facing fierce competition.

1. Offers May Be Considered Binding

When you outbid someone, you commit to the terms of that offer if the seller accepts it. In many jurisdictions, it’s a binding contract. So keep that in mind when you bid, so you only inadvertently bid what you can afford and get yourself into legal trouble.

2. The Seller Can Request New Bids at Any Time

Bidding wars move quickly. If the seller receives multiple bids and believes the buyers may be willing to pay more, they can respond to as many buyers as they like and ask for new bids. They don’t have to ask everyone — some offers won’t be competitive. They can also present a deadline, forcing competing buyers to crunch their numbers and present new offers in a matter of days.

3. The Seller Has the Final Say

Even if you make the highest offer, you can’t be sure the seller will choose your bid. The other party may have suggested terms more attractive to this particular seller, such as a large down payment or an all-cash purchase.

Effective Strategies To Win House Bidding Wars

You win a real estate bidding war when you make the highest offer — often easier said than done. Many home buyers find themselves embattled after deciding how much to bid on a house, only to find that someone else bid slightly higher.

Your goal is to make an offer on a house just above what the other party can afford. Of course, you want to be the highest, but you want to avoid bidding yourself into an unaffordable mortgage or down payment.

Striking that balance takes strategy and a working understanding of the process. Here’s how to make a house offer more attractive and increase your chances of acceptance.

1. Make a Large Earnest Money Deposit

When you submit an offer on a property, you make an earnest money deposit that confirms your serious interest in buying. Standard earnest money deposits are usually 1% to 2% of the total buying costs — for example, $2,500 on a $250,000 home.

Buyers may submit a larger deposit to stand out from the competition. The seller knows you mean business if you submit 5% or even 10% of the purchase price. They may even favor you over another buyer.

That said, your earnest money deposit may be non-refundable in certain circumstances. So ask your real estate agent what risk you’ll take before you commit thousands or more in earnest money.

2. Waive the Appraisal Contingency

Purchase agreements often include appraisal contingencies, which allow the buyer to withdraw the offer if the home appraises for a lesser amount. For example, you can walk away if you offer $350,000 and the appraiser values the home at $300,000.

Appraisal contingencies prevent buyers from paying too much for a home. However, if you’ve entered a bidding war, you’ve committed to spending what it takes to win, which could result in overbidding on a house. Removing the appraisal contingency tells the seller you’re serious about your bid and won’t back down. 

As the real estate market becomes increasingly competitive, more buyers choose to waive these contingencies to make themselves stand out. Following this trend can help you stay competitive if others also waive contingencies and give you the edge if they don’t.

2. Remove the Financing Contingency

The financing contingency is another common “if” in real estate negotiations — in this case, you’ll buy the home for your offered amount if your lender approves your mortgage application. If you don’t get a loan and have a financing contingency, you can walk away with no financial loss.

Without a financing contingency, you can’t withdraw your offer without losing your earnest money deposit. 

3. Waive the Inspection Contingency

The inspection contingency is the last of the three significant stipulations in real estate offers. It lets you withdraw from the sale with your earnest money intact if the home inspection reveals significant structural issues, such as a cracked foundation or termite infestation.

Waiving the inspection contingency can put you ahead of other bidders in a war, especially if the home needs some work. Your offer will be more reliable than one that rests on inspection results.

However, if you need more clarification about the state of the home, a waived inspection contingency can be extremely risky. You could find yourself paying well above the asking price with tens of thousands of necessary repairs.

4. Shorten the Inspection Contingency Time Frame

If removing the contingency is too risky, you can offer to shorten the contingency period. This tactic gives you less time to order and act on the home inspection.

Every inspection contingency has a time frame for the buyer to decide their course of action. In Pennsylvania, for example, a buyer has 10 days to complete the inspection, review the results, and decide whether to proceed.

You can reassure the seller by shortening that period to a week or less. The seller will know, for better or worse, they will be able to confirm whether the sale is happening immediately.

5. Agree to the Seller’s Ideal Closing Date

Choosing your closing date based on the seller’s needs is an effective and low-risk tactic if you have a flexible home closing timeline. 

Many sellers have a target closing date because they’re also buying and need the money from the sale to fund their purchase. Alternatively, they may need the purchase and sale simultaneously, so they don’t have to worry about interim housing.

All you need to do is have your agent ask the seller’s agent about their timeline and work that closing date into your purchase contract.

6. Include a Rent-Back Agreement

Some sellers will close on their current home while shopping for a new one. Offering to rent the house back to them after closing can relieve them of the stress of moving out.

A rent-back agreement lets the seller temporarily live in their former home after closing. The rental period can be anywhere from a month to six months. If your seller is building or searching for a dream home and wants to move only once, the rent-back agreement can give you an advantage.

Assuming you don’t mind becoming a temporary landlord, it’s a win-win situation.

7. Include an Escalation Clause With High Intervals and a High Limit

Escalation clauses can be powerful weapons in bidding wars. If you can significantly outbid a competing offer quickly, you can end the competition without much stress.

For example, suppose you anticipate a bidding war. In that case, you might offer $300,000 with an escalation clause stating you’ll outbid others by $7,500, up to a maximum of $400,000. If the other party escalates by just $1,000 and has a $350,000 maximum, you’re more likely to win the house for less.

Escalation clauses bidding wars don’t guarantee a win. The seller could approach each potential buyer with a counteroffer and see how high each will go. Then, they could challenge all bidders to exceed the highest bid, effectively starting a bidding war. 

Before adding an escalation clause, ask your agent how the seller will handle multiple offers. If they allow counteroffers, escalation is a solid place to start.

8. Compete With Cash Offers

Cash offers have always been trump cards for real estate buyers. Even a waived financing contingency can’t compete. If you don’t need a mortgage, the house will close faster, and the risk of you backing out due to funding problems is near zero.

Cash purchases are becoming more popular, but it’s still a less common way to buy. In 2022, only one in 10 housing transactions were cash sales. So if you can pay cash, you’re already ahead of 90% of buyers — a number likely to include your competitor.

Add more to your down payment if you can only pay partially in cash. A higher down payment can tip the balance in a buyer’s favor.

9. Write a Letter to Homeowner To Sell the House

Humans are emotional beings. As hard as we might try to make big decisions rationally, our feelings still drive us forward — especially when it comes to personal matters like our homes.

Play to the seller’s emotions by writing a personal letter, telling them why you want to buy their home. Maybe they raised their children there and will be happy to know you want a home where your kids can grow up. They invested in upgrading their kitchen and will appreciate being able to sell to people who love to cook.

Touch on anything you know matters to the seller — family, hosting gatherings of friends, or being involved in the neighborhood, for example. Research shows they’re more likely to stick with that decision if they choose you based on emotional factors.

Tips To Handle Home Offers as a Seller

Bidding wars can be gold mines for sellers. When more than one buyer is passionately interested in your home, they’ll often attempt to outbid each other beyond what they had initially intended to pay.

If you play your cards right, you could end up with your dream offer. Here’s where to start.

1. Learn About the Bidders

Competitive intelligence is for more than just buyers. If you anticipate or are involved in a bidding war, ask your agent for all the information they can get about the sellers, including:

• How much do they plan to put down
• Whether they’ll finance or pay cash
• When they want to close
• How much they’ve submitted as an earnest money deposit
• What contingencies do they need

The more information you have, the more prepared you’ll be to choose the most attractive offer.

2. Consider All Aspects of an Offer (Not Just the Selling Price)

The best offer will only sometimes be the highest. If you have a $250,000 offer and a $276,000 offer, it’s tempting to jump on that extra $25,000. But what if the $250,000 buyer is willing to waive the appraisal contingency and put 20% down, while the higher bidder only has a 5% down payment and isn’t waiving anything?

That higher bidder could easily fall through if they can’t get financing or the house appraises low. Of course, by the time that happens, your lower — but still respectable — bidder could have walked away. 

3. Negotiate

If you have two or more bidders ready to outbid each other, it’s time to start the negotiation process. Ask each bidder to submit their best possible offer.

Consider each offer as a whole package. Look at the selling price, the buyer’s financial strength (including the down payment), contingency waivers, and closing dates.

Decide whether you’ll accept someone’s best offer or negotiate with one or more potential buyers. A specific offer may look strong, but you need to change certain terms. 

As the seller, you’re in the driver’s seat.

House Bidding Wars FAQ

From “how to handle multiple offers on a house” to “how to win a bid on a house,” buyers and sellers have many questions about house bidding war rules. Here are some of the most common.

Find the Right Agent To Help You Win This War

Whether you’re involved in a bidding war as a buyer or seller, you need more than a knowledge of house bidding war rules. You also need a knowledgeable agent on your side.

 FastExpert can help you find a qualified real estate professional in your area, each ranked by reviews and sales. Get started today to move closer to winning your dream home.

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