Nine out of 10 Redfin agents say this is the most competitive real estate market they’ve ever seen or close to it, according to a March survey of 326 Redfin agents. Supply is at a record low and buyers are competing fiercely for the homes that are on the market; prices are up 16% from last year.
Looking ahead, rising mortgage rates–which haven’t dampened homebuyer demand yet–could help the market cool off a bit. “The housing market could shift in the coming months,” said Redfin Chief Economist Daryl Fairweather. “Buyers should talk to their agents and keep an eye out for overpriced homes that have been sitting on the market for more than a week, as there may be less competition for those homes.”
We’ve asked Redfin agents around the country how they are helping homebuyers win in competitive situations. Below is a roundup of tried-and-true bidding war strategies, recommended by Redfin agents.
It’s no secret that more money usually equals a better chance of winning a bidding war. Redfin agents suggest being as prepared as possible to enter the homebuying fray, with a clear idea of how much money you can realistically spend.
“I advise clients to put in their absolute best offer, with no regrets,” said Greg Mathers, a Redfin agent in Walnut Creek, CA. “They should have no regrets if they win, and no regrets if they lose. That way, they won’t feel buyer’s remorse, but they also won’t feel disappointed if they don’t win the house because they’ll know it was simply outside their price range.”
With that in mind, agents recommend starting with the following strategies:
Waiving the inspection and financing contingencies are common strategies, but in today’s market, many homebuyers waive the appraisal contingency, too. That means the buyer commits to paying the agreed-upon price, even if the official appraisal comes in lower. It’s a common strategy right now because homes are often bid up way above list price, increasing the likelihood that an appraisal could come in lower than the sale price.
“It’s important for sellers to know buyers have the cash to pay up and a deal won’t fall through if the appraisal is low, which buyers can convey by waiving the appraisal contingency,” said Illinois Redfin agent Christopher Prokopiak. “Sometimes buyers should shuttle money from the down payment to cover an appraisal gap, if that’s an option with their loan.”
In such a hot market, buyers shouldn’t expect a counteroffer. While buyers may be tempted to make an offer below the asking price, that’s not the way to win a home in a competitive situation. If an offer is too low, the seller will simply choose a different offer–often without giving other bidders the chance to counter.
Buyers should tour a home as soon as possible after it’s listed, and definitely before an open house if there is one. They should consider submitting an offer sight-unseen if they can’t get to the house fast enough.
Many listing agents set a review date, often five days or so after a home is listed for sale, which is a deadline for offers and means the expectation is that the seller will review all offers at the same time. But offer review dates aren’t enforceable, and sellers are technically free to accept an offer whenever they want. Buyers should consider submitting their best offer as soon as they know they want to buy a home–sometimes, that can end a bidding war before it even starts. Still, keep in mind that every home sale is different and in some situations it’s advantageous to wait for the offer review date. Talk to your agent to choose the best possible timing.
“The typical listing in my area may receive 14 offers within 48 hours. Time is of the essence,” said Isabel Arias-Squires, a Redfin agent in Fort Myers, FL. “A buyer who is truly ready should not trust the deadline for submitting offers. They should be ready to submit complete, simple offers with as few contingencies as possible, along with the proper supporting documents.”
Redfin agents report that having an open line of communication with the listing agent helps win bidding wars. That way, the buyer can figure out what the seller wants–and the seller knows what the buyer can offer.
“As a buyer’s agent, developing a rapport with listing agents is pure gold,” said Austin Redfin agent Chris Lefforge. “I establish a personal connection with listing agents whenever possible, reaching out to them with questions and telling them a bit about my client’s story. I believe our chances of winning are higher when the agent knows you’ll be pleasant to work with and the deal will go through smoothly.”
Another advantage of connecting with the listing agent? All sellers are different, and every home-selling situation is different. Ask the agent what the seller wants. If it’s important to the seller to rent back their home for two months after closing, offer that. If it’s most important to close the deal quickly, offer a short closing window.
Many homes sell in a matter of days in this market–perhaps they’re listed on a Thursday with an offer review date the following Tuesday, and the seller accepts an above-list-price offer on Sunday. A record 45% of homes had an accepted offer within one week of hitting the market as of the four weeks ending March 13.
Redfin agents recommend looking at homes that have been on the market for at least 10 days with no offers. Buyers may be able to avoid a bidding war and pay asking price–or possibly even under asking price–and keep contingencies if a home hasn’t attracted much attention. That doesn’t necessarily mean something is wrong with the house; maybe it’s overpriced or the seller just didn’t market it correctly.
“I recently had an unusual situation where my client was able to win a bidding war against two other offers with a low earnest-money deposit and we retained all contingencies,” said Issaquah, WA Redfin agent Debbie Bacos. “I believe we faced less competition because the listing didn’t have professional photos. The house was beautiful in person but didn’t show well online.”
Most homebuyers have a pre-approval letter from their mortgage lender before they make offers on homes. But beyond that, it’s helpful if your lender is willing to speak with the listing agent.
“Speaking with a lender–especially one who’s trustworthy and local–can ease a seller’s mind and assure them a deal is likely to go through,” said Barbie Edwards, a Redfin agent in Southern California. “You can submit an offer that’s very similar to another one, but if your lender took the time to answer the listing agent’s phone call and talk through their financing questions, the seller may choose you.”
And a few final words of advice…
