10 Clever Strategies to Win a Bidding War for Your Next Home

The process of buying a house has become intensely competitive in the past year. Low housing inventory and rising material costs have helped fuel the hot housing market. Some buyers also have tried to get into the market before low mortgage rates head higher.

It may be difficult to buy a home in this market due to the excessive competition, particularly if you get in a bidding war to buy the house that you want. Check out some strategies that might help you lock out the competition and secure your next home.

A common homebuyer mistake is to not get pre-approved for a loan before you start shopping. This can be an even bigger issue in a competitive market. Sellers may get nervous if they see an offer from a buyer who hasn’t been pre-approved for a loan yet, which may hurt the potential buyer.

So, try to get a pre-approval before you start looking at homes. The seller then has the peace of mind of knowing that a pre-approval stands behind your offer.

Best Mortgage Lenders

Pro tip: Use the pre-approval process to gain a better understanding of how to get a loan. The steps you learn during the homebuying process might help you get a loan for things such as a car or home improvements in the future.

Just because you were pre-approved for a certain amount doesn’t mean you have to buy a house in that precise price range.

Instead, calculate how much your monthly mortgage would be if you bought a home at various price levels. This can help you set a maximum price that you’re willing to pay. Then, think about looking for houses below that maximum. That way, you already know that you have some wiggle room before you hit the top price you are willing to pay in a bidding war.

Think about what you will or will not accept as part of a counteroffer. If you have a clear idea of your limits, you might be less likely to get swept up in the emotions of a bidding war and potentially agree to an offer that makes you uncomfortable.

Knowing your limits can also help you feel empowered to negotiate from a strong position, since you already have laid out rules for yourself.

Putting in an offer over the asking price might be a good way to let a seller know you’re serious and ready to buy. However, you want to be strategic about the offer you make. You can go over the asking price, but try not to go too far beyond that price. If you offer too much, you might end up overpaying.

Remember to set your own above-offer limit before you get into a bidding war. You don’t want your emotions to take over and push you into offering more than you can afford.

In a typical housing market, buyers expect to be allowed to walk through the home with an inspector to check for any issues and ask for any repairs or changes to be made before closing on the home. But in this competitive market, some are willing to waive certain contingencies to make their offer more enticing for sellers.

However, think twice before pursuing this strategy. An inspection can protect you from facing unexpected issues or expensive repairs after you buy the home. If you do agree to waive the inspection before you buy a home, set aside some extra cash for repairs or other issues.

This may be a tough option for anyone buying a home, especially first-time homebuyers who might only have saved up enough for a down payment. But an all-cash offer means there’s no need for the approval from a mortgage lender to loan you the money, which may make your offer more enticing for a seller.

Buyers might offer around 1% to 3% of the cost of the house as earnest money, which is a good-faith deposit that shows the seller you’re seriously interested in the home. But if you get into a bidding war, consider boosting your promise of earnest money to up to 10% of the home’s value. This could help make the seller favor your offer over others.

Pro tip: If you decide to increase your earnest money, carefully check the terms of the sale so you know exactly what will trigger the refund of the amount if the sale hits a snag.

Related: 6 Big Moves to Grow Wealth

If a seller has several offers in front of them, they may want to negotiate with multiple buyers. This could put you in a bidding war with others, and you want to be able to respond quickly.

Consider having multiple phone numbers available where you can be reached, and try to stay in close contact with your real estate agent as you negotiate a potential deal for your new home.

It can be difficult to keep things professional when you’re spending so much of your personal finances on a home you love. But remember that this is a business transaction.

Be firm and negotiate like a pro. Remain professional and prepared for any questions or issues that might arise. Consider all possibilities during the process, including what you might have to do if your offer isn’t accepted.

Being flexible can be difficult during the potentially stressful homebuying process, but it also can help you secure a home. A seller may be waiting to close the deal on their own new home, or they may want to delay the sale until a child finishes the year at school. That means you might need to accept a closing date a few months in the future if the sellers aren’t willing to leave just yet.

Being flexible in these situations can help you secure the contract for that home.

Trying to buy a house in today’s market can be stressful between getting an accepted offer and locking in a great mortgage, but there are ways you can put yourself in the best possible position to secure your purchase. Make a plan before you put an offer on a home so you’re prepared for whatever happens during the process. Using the right strategy can help get your offer accepted.