Today’s housing market is one of the most competitive in history. Remote work and record-low mortgage rates are prompting scores of Americans to relocate and purchase homes. The problem is that there aren’t nearly as many homes for sale as there are buyers—an imbalance that’s fueling fierce bidding wars.
“It’s the best and the worst time to buy,” said Faith Floyd, a Redfin real estate agent in Houston. “It’s the best time because mortgage rates are so low, and it’s the worst time because everybody wants to take advantage of low mortgage rates.”
Even cash-rich buyers are getting outbid these days. Arlington, VA Redfin agent Alyssa Rajabi had a client who offered to purchase a four-bedroom home exclusively in cash and ended up losing to a buyer who had offered nearly double the $275,000 asking price. The Falls Church, VA home received a total of 129 offers.
Boston Redfin agent Michael Gavrilles said one of his buyers recently showed up to an open house in Lancaster, MA 45 minutes before the scheduled start time and ended up being 55th in line. The four-bedroom, two-bathroom ranch-style home, listed at $389,900, attracted 71 offers.
“This home had the trifecta of being meticulously maintained, priced well and in a quaint town with highly-rated schools. Ask any first-time buyer what they’re looking for and this property would be at the top of their list,” Gavrilles said. “ Unfortunately, it’s also exactly what someone who’s downsizing and is flush with cash is looking for. First-time buyers are getting squeezed out of this market, or at least finding it near impossible to compete on a level playing field.”
Many buyers are becoming fatigued and disheartened after getting offer after offer rejected, so we asked Redfin agents to share the best unique strategies for winning bidding wars in 2021. The tactics below go beyond basic bidding-war techniques like waiving contingencies, offering all cash and/or above the asking price and free rent back, though buyers should also consider those strategies, which are often highly effective. Each of the following tactics poses risks, some more than others. Before making any decisions, always be sure to seek the advice of your real estate, legal, and/or financial planning professionals.
Single-family homes have been all the rage during the coronavirus pandemic, with so many Americans exchanging their cramped city apartments for extra space in the suburbs. In January, 58.7% of offers for single-family homes written by Redfin agents faced competition, compared with 54.8% for townhouses and 44.6% for condos.
Buyers who want a better shot at winning bidding wars should consider purchasing condos, which have attracted less competition during the pandemic because they often feature shared spaces and amenities. Condos have been selling for a record 17% discount to single-family homes, another potential draw for buyers.
“Single-family homes in Seattle are hot, hot, hot,” said local Redfin real estate agent Sarah Rollinger. “Townhomes are picking up steam, but condos are still 110% a buyer’s market. I have seen a lot of canceled condo listings, so we have quite a backlog of condo sellers on top of the current inventory.”
Shorten the contingency timeline: One of the best ways to make an offer more competitive is to waive contingencies, such as the inspection contingency and the appraisal contingency. Buyers who don’t feel comfortable doing this can instead opt to expedite the contingency timeline, meaning they agree to wrap up their inspection or appraisal more quickly than normal.
“The standard for an inspection contingency in California is 17 days, but every single time I send in a counter offer for one of my sellers, I ask if the bidder is willing to conduct the inspection in seven to 10 days,” said Sylva Khayalian, a Redfin agent in Los Angeles.
Sign a low-appraisal addendum: If you can’t waive the appraisal contingency, another option is to cover the difference if the appraisal comes in low. For example, if you offered $400,000 and the appraisal ends up at $375,000, you can agree to cut a check for $25,000 when the deal closes.
Speed is key in a seller’s market as competitive as this one. If you’re interested in a home but live far away or just haven’t been able to tour it, you can still throw your hat in the ring. Video tours and 3D walkthroughs have made sight-unseen offers much more feasible during the pandemic. Almost two-thirds (63%) of people who bought a home last year made an offer on a property they hadn’t seen in person, the highest share since at least 2015 and up from 32% a year earlier, according to a survey Redfin commissioned in November and December.
“My client lost out on even seeing a house because the seller accepted an offer before starting showings,” said Colorado Springs, CO Redfin agent Ashley Farrell. “The listing went active Tuesday and showings weren’t scheduled to begin until Thursday, but the seller received five sight-unseen offers and was under contract by Wednesday afternoon. The winning bid was all cash, $45,000 over the $380,000 asking price, and waived the appraisal and inspection contingencies.”
House hunters can also stay on top of their game by monitoring “coming soon” listings on Redfin.com.
In a fast-paced real estate market, constant communication is essential. Buyers should work with agents and lenders who are willing to keep in contact with one another and with the listing agent in order to gather intel about what the seller is looking for, and ensure that the seller knows the buyer is serious.
Use a local lender and ask them call the listing agent: “When I’m dealing with a multiple-offer situation, a huge plus is when the buyer’s lender contacts me to introduce themself and let me know that they’re on top of everything,” said Sylva Khayalian, a Redfin listing agent in Los Angeles. “Sometimes I get calls from lenders before I even reach out to them to confirm a buyer’s pre-approval, and I love that because it reassures me that I’m not going to have any communication issues and makes the buyer’s offer more competitive. It’s also great when the lender is local because that means they know the ins and outs of the market.”
Ask your agent to follow up with the listing agent: “My client kept getting beat due to their home-sale contingency, even though they were offering $30,000 over the listing price, waiving the inspection and offering an appraisal guarantee,” said Boise, ID Redfin agent Shauna Pendleton. “Each time, I called the listing agent and asked (begged) them to call me if the winning bidder was going to back out. I was calling each agent once a week to check on the status of the contract. One agent finally called me to tell me the current contract was terminating and she was giving us first rights to get our original offer accepted. The key to us winning this house was communication and persistence with the listing agent, as well as being available at a moment’s notice.”
A lot of successful buyers today win by making an offer that exceeds the asking price. This also means that a lot of buyers end up exceeding their budgets. To prevent this, San Diego Redfin agent Jim Johnston recommends searching only for homes that are $50,000 to $75,000 below what you can afford, so there’s room to negotiate if necessary.
Once you’ve identified those properties and are ready to start bidding, research recent home sales in your area to determine how much the typical winning bidder is offering above the asking price, said Raleigh, NC Redfin agent Pam Lewis. Then offer more.
“If most winning bidders in your area are offering 5% more than the listing price, then offer 6%,” Lewis said. “And make your offer amount an odd number.”
Earnest money is a deposit buyers put down to show sellers they’re serious about purchasing a home. Typically, a buyer deposits this money into an escrow account when they go under contract on a home, and it’s applied to the purchase price at closing. In today’s competitive market, some buyers are offering to release these funds to the seller early as a non-refundable deposit—typically within a few days of going under contract, according to Seattle Redfin agent Heather Stovall.
“This is an enticing offer for many sellers because it means they immediately receive and can keep the funds regardless of whether the transaction closes, and can put those funds toward the purchase of their next home if needed,” Stovall said. “Of course, releasing earnest money early can be a risky proposition for buyers. If a buyer’s financing falls through or they lose their job and can’t complete the purchase, they don’t get the earnest money back after it has been released.”
Homebuyers can make their offers more competitive by offering to pay for expenses that are typically covered at least partially by the seller. These costs can include transfer and recordation taxes, along with title insurance.
“On a scale of 1 to 10, the competitiveness of today’s market is a 10,” said Maryland Redfin agent Zachariah McBride. “I have only won by having my buyers help the seller net mostly all of their money by covering taxes and paying above the appraised amount in the event of a low appraisal.”
With more than half of offers facing competition these days, it’s more likely than not that you’ll get into a bidding war if you’re in the market for a home. Go into the process mentally prepared to lose more than once.
“I have clients who have been trying to buy a four-bedroom single-family home in the $650,000 to $800,00 range since November. They started relatively conservatively, offering just over the asking price and maintaining some contingencies,” said Alexandria, VA Redfin agent Matt Ferris. “Three months in, they’d submitted seven failed offers and came around to being very aggressive. They finally got an offer accepted on a home this month. The home they have under contract is very nice, but smaller than the first one they bid on, and they’re paying $10,000 above what that first home closed for. They also had to bid on it sight-unseen before it came on the market and waive all contingencies. It’s a lesson in making offers as strong as possible early in the process.”
It’s also wise to know when to walk away. It’s OK to put your search on hold if you reach the point where you’re not comfortable making the aggressive offers that are often necessary to win in today’s market. You don’t want to end up with buyer’s remorse, after all.
Some buyers and agents are going to great—and unusual—lengths to win bidding wars. Here are a couple of fun examples:
A frothy market: “I’m working with a hop salesman who is offering beer tasting to the sellers.” — Ellen Hudson, Redfin agent in Portland, OR
In it to win it: “I researched the seller and found out he’s a former professional athlete. I fine-tuned the offer so that his jersey number—64—was included in the offer amount (964,000 Canadian dollars) and the deposit amount (64,000 Canadian dollars). We ended up beating out a higher, all-cash offer.” — Michael Craigmyle, Redfin agent in Vancouver, B.C.
Bidding wars are stressful for buyers, but can be overwhelming for sellers as well. Here are a handful of helpful strategies for sellers dealing with high demand:
Get a room: Plan to list your home on a Thursday and check into a hotel, stay with a family member, or leave town for the weekend while prospective buyers are touring the property. This allows for more showings and reduces stress. If you have a good listing agent, they’ll be able to handle it without you.
Make sure the price is right: It may be a seller’s market, but that doesn’t mean you should ask for the moon when pricing your home—a tactic that can scare buyers off.
“It’s very important to price your home in the `sweet spot’ in order to drive demand and offers through the door. Not too high and not too low,” said Dallas Redfin agent Christy Mullins. “This creates a buzz and brings a rush of buyers, who will likely bid up the price of your property as they compete with one another.”
But know that price isn’t everything: Sellers should consider many factors beyond just the offer price. Other key considerations include the financial strength of the buyer, the best closing date, and buyer enthusiasm.
“Offer price is important, but the terms of the deal and the buyer’s excitement about the property are just as important,” said Denver Redfin agent Antonio Ayala. “Buyers who really love the property are more likely to look past inspection issues and agree to terms that are beneficial to the sellers.”
“When offers are really close, decide what your biggest motivation is for selling your home, and choose the offer that best accomplishes that goal,” added Detroit Redfin agent Sarah Webb.
Disclaimer: This article is for informational purposes only and is not a substitute for professional advice from a licensed attorney, financial planner, or real estate professional. Redfin strongly recommends prospective buyers consult with appropriate professionals when making homebuying decisions.
