How to Anticipate a Bidding War in a Hot Real Estate Market

Here’s how to “sweeten the deal” when a bidding war erupts during negotiations for the purchase of your dream home.How to Anticipate a Bidding War in a Hot Real Estate Market

In a hot real estate market, it is best to work with your real estate agent to have a strategy in place in anticipation of a bidding war breaking out.

Get Your Finances and Pre-Approval Letter Under Control

Agents will tell you it goes without saying that you should have your financing in order even before you bring an offer to the table. Check with your financial advisor or lender to determine what you can afford. That includes considering the amount of “wiggle room” you would have available to give you greater leverage during heated negotiations for the home you want to buy.

With your preapproval in hand, you could offer the asking price. To keep your offer in competition with others on the table, including an escalation clause enabling you to counter any higher bids up to a certain amount.


Another strategy to give you an edge in a bidding war is to drop contingencies such as requiring your home to be sold before closing the deal. A bridge loan from your lender or another financial institution could provide the breathing room you need to close the deal as quickly as possible on the new home before your existing home sells.


Offering flexibility on the closing date can sometimes give you an advantage over other bidders. Making as large a down payment as possible and providing earnest money quickly are other steps you can take to keep your offer in the forefront. Of course, making a cash offer will generally preempt contingent bids.

Do Letters Work?

Often, a heartfelt letter explaining why you want to purchase the home for your family might influence the seller to accept your offer even if it isn’t the highest presented. Emotions run high in the minds of both buyers and sellers who see a home as a reflection of shared values and preferences. A Portland family recently discovered the seller chose their offer after they wrote a letter emphasizing their two young daughters would benefit from the home’s location in an excellent school district.

In some cases, this sense of altruism on the part of the seller may result in the acceptance of a lower offer even in the midst of a bidding war.

As a buyer, being flexible on a move-in date can sometimes be more valuable to a seller than a higher bid on the home. In some cases, for instance, a seller may need more time because of delays in the construction of a new home. Buyers can tip the scale in their favor if they agree to rent back the home to the seller for a specified time after closing.

When bidding wars accelerate at a rapid pace, buyers may be vulnerable to making a purchase that is not in their best interest from many perspectives, financial and otherwise. When the temptation to keep “upping the ante” takes hold, it may be prudent to reign in impulses, walk away, and start looking for another more affordable “dream home”.

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