4 Great Ways to Win in a Bidding War

Tara M. Gore

By Tara M. Gore

 It’s no doubt things are heating up this spring. The stats speak for themselves. Jonathan Smoke, REALTOR.com’s chief economist noted, “Existing-home sales from January 2015 to January 2016 have grown 11 percent.”

Although housing numbers are strong and consumer confidence continues to improve, inventory remains a challenge leading to bidding wars. When you add in low interest rates, as well as more buyers shopping in the market, the competition is fierce.

Here are some ways to get ahead of your peers and win more offers.

1. Make sure your buyer has a mortgage pre-approval, not just a pre-qualification.

There is a difference and understanding it is critical. With new government regulations and mandatory disclosure requirements, the quicker and more thorough your buyer’s pre-approval letter, the stronger the offer.

A mortgage pre-approval is a detailed and qualified review of a buyer’s personal information to ensure the buyer meets current lending guidelines. It occurs when a lender verifies paystubs, W2s, tax returns and asset information for qualification purposes. Most importantly, the applicant’s tri-merge credit report is run and reviewed.

A great example for common mortgage denials due to information provided not matching actual documentation would be a self-employed buyer. It’s not uncommon for a buyer to believe their annual income to be greater than what’s found on the tax returns, specifically self-employed buyers that typically have a lot of business write offs. While deductions may be good for tax purposes, they’re not necessarily good for income qualification.

2. Use a cover letter. When trying to stand out in a multiple offer situation, getting personal can also help! According to a 2015 study by Redfin, cover letters submitted with offers had a much higher rate of conversion. Roughly 46 percent of all accepted offers had cover letters. When polled, sellers in this study said they were drawn to the offers they felt presented a more personal connection.

Encourage your buyers to put together a cover letter addressing why they really want a particular house. Many people find real estate to be a personal decision, so let the seller see your buyer, their kids or anything pertinent to help the seller feel a connection.

3. Offer a larger than standard deposit or better yet, write a cash offer. Since an earnest money deposit will be given during the negotiation process, in good faith to the seller, it would show serious intent of the buyer if a larger amount were given. In a multiple offer situation, showing the seller your buyer is more serious than the others will help them to stand out.

In addition, cash offers are typically much faster paced and certainly desirable to any seller since there is no mortgage contingency. If your buyer is considering taking a mortgage solely to take advantage of the low interest rates, but have the funds to pay cash, this would be a great time to coach them. Paying cash doesn’t prevent them from taking a mortgage down the line, but it certainly could be the reason their offer is chosen over another.

4. Make a strong offer and use an escalation clause. In most bidding wars, strong offers are common, so making yours stand out is important. Brian Horan, a broker with Home Buyers Marketing II from California says, “Most offers will be in round numbers, so stand out by going to the next highest number with a 1 or a 6 at the end of it.”

If your buyer really wants a particular house, don’t be afraid to use an escalation clause. This tactic details how much you’re willing to outbid a competing offer, up to a certain limit.

For example, if you’re making an offer of $350,000 with a cap of $375,000, offering to outbid the highest bidder by $5,000 increments until the offer reaches its maximum of $375,000 is one way to get the seller’s attention and possibly your offer chosen over the rest.

Working in a real estate market with low inventory and multiple offers can be challenging, but if you have the tools and resources to make your buyers stand out, you’ll be more likely to win over the competition. Applying these tips can help prevent you from becoming a casualty in a spring bidding war.

Tara M. Gore is a top-performing mortgage originator with 13 years of experience working in the Philadelphia Metro area servicing multiple states. Tara has been recognized as one of the Top 50 Young Stars in MPA magazine and is a 2014 and 2015 Five Star Mortgage Professional in Philadelphia Magazine. From city to suburbs, she has a wide variety of loan products to provide the best financing opportunities to each of her clients. From first time homebuyers to savvy investors, Tara’s commitment is to provide a memorable experience with excellent customer service to ensure an ongoing relationship. Contact Tara at (609) 280-6292 or tgore@financeofamerica.com.