What happens if the most frustrating part of buying a home isn’t finding one that you love, but realizing that five other buyers love it just as much?
Would-be homebuyers don’t neatly line up and take turns making offers on a home, and multiple-offer situations have become increasingly common, especially for well-priced homes in prime neighborhoods. Those situations can feel overwhelming, even for experienced buyers. The pressure can be intense. Deadlines add stress. Emotions run high. Hesitation can mean “losing out” on the deal forever.
Just the same, you don’t want to end up with a serious case of buyer’s regret when you realize that you paid more than the home was actually worth, right? The good news is that you can be a competitive buyer without throwing your caution to the wind or your finances for a loop. It just takes the right preparation, strategy and mindset to win the house of your dreams without going overboard on the price.
Why Some Homes Attract Multiple Offers
Before you even start looking at homes and considering tactics, it’s helpful to understand the catalyst for multiple home offers and “bidding wars,” because it isn’t all about scarcity.
Homes that attract multiple bids very quickly tend to share a few common characteristics. They are priced realistically, show well and meet a broad range of needs. You may find that they’re initially priced slightly below market value, a fact that can sometimes help create a sense of urgency and competition among buyers.
When you recognize these patterns, you can better predict when competition is likely and develop a plan that will keep you from making snap decisions that you’ll later rue.
Do Prep Work Before You Start Shopping
One of the biggest advantages you can have in a competitive market is preparation. What does that mean? Before you start making offers, make sure you have:
- A mortgage pre-approval, not just a pre-qualification
- A clear understanding of your maximum comfortable monthly payment
- Funds readily available for your earnest money, down payment and closing costs
- A realistic sense of current market values in your target area
Knowing your numbers before you go looking at homes allows you to move quickly without panic. It also prevents you from stretching beyond your comfort zone in the heat of the moment.
Work With an Agent Who Knows the Local Market
In any real estate situation, knowledge is power – and local knowledge is especially important. An experienced REALTOR® can provide insights into values and neighborhoods and future expectations that online listings and automated estimates simply cannot. They may know how aggressively homes in that neighborhood tend to sell, how long similar properties stayed on the market and what contract terms sellers tend to favor.
A skilled REALTOR® can also communicate directly with the listing agent to gather critical information. Sometimes sellers care more about the timing of a closing, move-in date flexibility or a “sure bet” when it comes to financing than squeezing every possible dollar out of a deal. Understanding what motivates the seller allows you to tailor your offer in a way that stands out without automatically escalating your offering price.
Focus on Offer Strength, Not Just Price
Sure, money talks, but price is just one part of a strong offer. In many cases, sellers are weighing several offers that are close in dollar amount. When that happens, the unique terms of each offer can be more important. Strengthening your offer in other ways can make it more appealing without putting more money on the table. For example:
- A larger earnest money deposit can signal confidence and commitment
- A flexible closing timeline can accommodate the seller’s needs
- Fewer contingencies can reduce uncertainty for the seller
- Offer a rent-back period so that the seller feels less rushed about their move
The key to making a successful offer is balance. You want to present a reliable, straightforward offer that sweetens the deal for the seller while still protecting yourself from unnecessary risk.
Be Strategic About Your Contingencies and Clauses
Contract contingencies are important, so you don’t want to waive them entirely if you can avoid it. However, it’s important to understand how contingencies feel from the seller’s perspective because and they are largely uncomfortable.
In general, every contingency says to the seller, “We’ve got a deal and I’ll buy your home, unless…” So, do what you can to minimize any anxiety a contingency may produce. You don’t have to waive the home inspection, for example, but you can shorten the timeline. If you’re confident in your financing, you might consider waiving that clause. Others may include appraisal gap language with a defined cap, limiting your financial exposure while still reassuring the seller.
Before altering or eliminating any contingencies, talk through the potential risks carefully with your REALTOR®. A smart strategy is one that you still feel comfortable with after the adrenaline rush that comes with finding that great home starts to fade.
Use Escalation Clauses Carefully
Escalation clauses, in a real estate contract, automatically increase your offer in response to a competing bid, up to a pre-determined maximum. While they can help you stay competitive in a tight market, they can also push you outside of your financial comfort zone if you don’t handle them correctly.
If you choose to use an escalation clause, make sure you understand:
- Your true maximum price, based on your lifestyle goals
- Whether the clause requires proof of competing offers
- How incremental increases are triggered
Remember that an escalation clause does not guarantee acceptance of an offer. Sellers may still choose an offer with cleaner terms or greater certainty even if it is slightly lower. So, this is just one facet of your offer to keep in mind.
Keep Your Emotions in Check
This is the tough part. Every home purchase is deeply personal, so emotional decision-making is almost inevitable (to some degree). However, you can’t let your emotions lead you entirely, since that is what leads to overpaying. “Fear of Missing Out” (FOMO) is real, and it can hit even harder if you’ve already experienced the agony of bidding on other homes and losing out.
One way to stay grounded is to remember that the “right” home for you and your family is not just the aesthetics of a given property. It is also about how that property fits into your financial life. Overextending yourself financially today can limit your future opportunities and add unnecessary stress to your life. It simply isn’t worth it.
Now is the time to have those tough conversations with yourself, your partner, your loan officer and your REALTOR®. Be ready to do whatever it takes to keep yourself operating from a primarily logical place, no matter what your heart is saying.
Know When To Walk Away
Finally, the most important part of this strategy is knowing your limits. It doesn’t matter how competitive the market appears to be – another home will eventually come along.
When you place a bid, it’s okay to be prepared to escalate the price a little – but have a clear concept of how much is “too much” and honor it. Once that number is crossed, let the home go. You will find something else.
Take the Long-Term Approach to Buying
A home purchase is not a short-term victory – and winning does not always mean getting the first house you want. It means buying a home that actually fits your life without putting your finances in a pinch for the next few years (or longer).
By focusing on your strategy and having your “game plan” firmly in mind, you can avoid letting your emotions take over, and that can make it far easier to navigate multiple offer situations with confidence.
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