Buying a home? Here's how to win a bidding war
After months of searching, you finally found the perfect home for you and your family. But you're not the only interested buyer. What can you do when faced with competition for a home you really want?
Luckily, there has been less competition in 2014 than in 2013, when there were many buyers competing for few homes. But there's still fierce competition this year for many homes across the country, including in Philadelphia. Real estate brokerage Redfin examined bidding wars throughout all of 2013 to see which strategies were most successful.
Looking at data from more than 10,000 offers Redfin agents wrote in 2013, Redfin determined which ones worked better than others. When buyers used one of these common bidding war strategies, they were more likely to win a bidding war. Here are the most effective bidding war strategies, in order of success. Read the full report on the Redfin blog.
1. All-cash offer. In 2013, all-cash offers were 28 percent more likely than financed offers to win a bidding war.
2. Pre-inspection. Having the home professionally inspected before submitting an offer is most common in cities like San Francisco and Seattle. Still, Redfin offers with pre-inspections were successful 21 percent more often than other offers. "A pre-inspection helps everyone, but especially the seller, feel better about your offer and commitment to the home," said Mark Colwell, a Redfin agent in San Francisco. "It tells the seller that you already know what's wrong with the home, you still want to buy it, and you're not going to ask them to pay for repairs later."
3. Waived contingencies. In 2013, offers with a waived financing or inspection contingency were 15 percent more likely than contingent offers to win a bidding war. These contingencies protect you from losing your earnest money in the event that you back out of the deal because your lender can't approve your loan in time or if you decide you no longer want the home after the inspection. Waiving the financing contingency guarantees to the seller that you'll come through with the money if your lender doesn't. Like the pre-inspection strategy, a waived inspection contingency makes your offer more attractive by letting the seller know you're not going to back out or try to negotiate for home repairs. However, waiving contingencies presents more risk than many buyers care to take on, so it's important to talk with your agent about whether this strategy makes sense for you.
4. Personal cover letter. Tugging at the seller's heartstrings by sending them a personalized letter explaining how much you love their home and how well you'll care for it actually helps seal the deal. Offers with personal notes were 9 percent more likely to win a bidding war. "Love letters work because they get the seller to relate to you on a personal level, so they see you as more than just a dollar amount," said John Underwood, Redfin agent in Los Angeles.
The right real estate agent will help you determine which strategies are best for you for a given home, and they'll also help you decide when to throw in the towel and move on to the next home. Find a Redfin agent in Philadelphia.