If you are thinking of buying a home in Seattle, bidding wars are alive and well. Inventory is very low and good homes at a good price will almost certainly bring out multiple bidders. You may be bidding against 4-5 other bidders, and the process is intimidating and stressful.
In general, the highest bid is likely to win, but not always. The reality is that when there are multiple bids, it is common that a few of them are very similar on offer price. Here are some not so obvious ways that home bidding wars are won (or lost).
- Confidence in buyer’s ability to close – A really high price is no good if a seller is worried about the buyer’s ability to actually get the deal closed. Apart from your offer price, a seller and their agent will looks at factors like the size of your down payment, size of your earnest money deposit, your current employment status, closing date and motivations for moving. A buyer with a large down payment, strong employment and a quick close that is clearly not dependent on the sale of another home will usually win out, even if there is a bit more money on another offer.
- Is your agent easy to work with? – Everyone wants a real estate agent who is a bulldog, fighting relentlessly for your best interests. In a bidding war, the line between persistence and bullying is a thin one, and you want an agent who is perceived as a “real pro” and is easy to work with. The winning agent is a strong communicator who is persistent and attentive to detail. They will listen to the seller’s needs and craft an offer that meets those needs. Arrogance and pushiness from a buyer’s agent will backfire on you when the seller’s agent thinks that your agent is going to be a pain in the butt to work with.
- Get your inspections out of the way – If a home sale is going to fail, it is probably because of the inspection results. An offer that has pre-inspected the home and waived the inspection contingency has a much better chance of success because it’s removed a huge uncertainty. This is a costly strategy, as you need to spend at least $400-$500 on an inspection for a home you may not get, but it can pay off if the house is right.
- Tell a story – Sellers often have huge emotional ties to a home, especially if they have been there for a long time and raised a family there. Put a face behind your offer with photos and a personal letter telling why you love the house. Yes it’s cheesy, but it can sway difficult decisions on similar offers. We’ve seen sellers accept a competing offer because the buyers “are in a similar situation to ourselves a few years back.” Maybe they sent their kids to the same school yours are going to go to, or maybe they have a similar job to you. You never know what little personal detail can make them feel better about you as a buyer.
- Skip the escalation clause and just make your highest and best offer – Buyers love escalation clauses. It allows you to raise your bid in increments to beat the next best offer, without having to potentially overpay. However, stacked against a straight-up offer for a similar price, the offer with an escalation clause almost always loses. If you have one offer for $500k against another offer that starts at $490k and escalates to $500k, the net result to the seller is the same. Sellers almost always pick the offer without the escalation because that buyer “wants it more.” I know this is irrational, but it happens all the time.
I’ve never met a buyer that wasn’t at least a little uncomfortable at the the thought of having to compete with other buyers for a home. Don’t get wrapped up in the competition and set your own limits on what you are willing to pay for a home. There will always be other homes to buy. At the same time, focus on the big picture. If the home is right for you and your needs, step up and take the extra steps to try and get it. An experienced agent who has been in these competitive situations can be an invaluable resource to coach you through the process and maximize your chance of success.