How to Outbid a Bidding War

By |2015-05-12T08:55:47+00:00May 12th, 2015|

As we discussed last week, bidding wars are back. With very tight housing supply, the likelihood of these bidding wars disappearing anytime soon is pretty low. According to the National Association of REALTORS©, one third of properties sold in March went at or above the asking price. So, how do you emerge as the winner of one of these bidding wars?

First things first, sellers don’t want to waste time. To best set yourself up for avoiding or winning a bidding war, you’ll first want to do the basics: have your financing in place, turn in all of your loan paperwork before placing an offer, and gather up all the cash you have. Preparation is key! Consider that the training leading up to the fight though. Here are some more creative ways that can help you get the upper hand in a bidding war:

  1. Come in Fast and Strong

Find a house you like? Tour it literally as soon as it comes on the market or as soon as you find it. If you like it, get your bid in early. If you are lucky enough to be the first offer, put your best foot forward. Coming in with too low of an offer runs the risk of not only insulting the seller, but making them think that you aren’t serious about purchasing their property. First impressions are important and sellers will innately establish a different kind of connection with the first offer (as long as it’s good). Waiting for offers is painful for sellers, so when that first serious offer comes in they will not only be relieved that someone wants to buy it, but may even start to visualize you occupying the property. Zillow has a great “coming soon” tool that allows real estate agents to signal that they’re about to put up a home for sale. If you’re on the market, use this to your advantage and look out for these so that you can get first dibs!

  1. Write a Love Letter

Ignoring logistics such as price and location, there’s always the emotional component when buying or selling a home. An effective strategy is to attach an email or letter with your offer, explaining why you want to live there. Depending on the story you tell in your letter, this has the potential to tug at the heartstrings of the seller and make them feel a stronger connection with you/your offer. For example, one noted strategy is to comment about the markings on the wall of the house that chronicled the height growth of the seller’s children. Writing about how you want to replicate that for your own family is a great way to establish a deeper connection with the seller and give you a leg up. Be honest though. There are easy ways to find out if you actually have a family, kids, dog, or whatever it is that you write about. Lying in your letter and the seller uncovering that lie is the quickest way to lose a bidding war.

  1. Increase the Cash

Easy right? Not always. One way to truly get the seller’s attention though is with cash. According to CNN Money, all-cash sales represent more than 40% of recent sales. That number may seem surprising, but ever since the housing crisis, getting a mortgage has become a lengthier process and there’s always a chance that it can fall through. With all cash offers, sellers know that they won’t have to wait for financing approval or any external forces beyond processing the deal. Sellers have even been known to sometimes accept a offer if it’s all cash instead of financed because of the contingencies and unknowns associated with processing mortgages. Can’t pay all cash? Come willing to pay closing costs or other additional costs associated with the deal instead.

  1. Get Your Mortgage in Advance

As we mentioned earlier, take care of financing details upfront. Getting pre-approved for a mortgage is great to know what budget your can work within; however, there are a lot of steps between pre-approval and closing a deal that can quickly change that final financing number. Take it a step further by pre-underwriting a mortgage. In this case, lenders review all of the income and asset documentation that would be needed to approve a mortgage. The aim of pre-underwriting is to put the borrower in the same position as a cash buyer. Knowing a major hurtle is covered gives sellers a more comfort because they don’t need to worry (as much) that a buyer’s mortgage will be rejected since all that is left is the completion of an appraisal. Some lenders even guarantee that they will refund the deposit if they can’t complete the transaction because of an unseen situation.

  1. Agree to Outbid Everyone

If a property is really the one you want, then you might consider an “escalation clause”. This means that if your offer gets outbid, you agree to pay $X, or $1,000 or $10,000 more than the highest bidder. The danger with this strategy is that you ultimately won’t ever truly know if the other offer is real. Sellers can easily ask someone else to submit an offer just to raise the price. Another problem is that the final home price might be a lot higher than the market value of the home. If you’re relying on a mortgage to pay for the property, that new price could jeopardize the mortgage or force you to make up the difference in cash. One way to combat this is to cap the bid and pay no more than 10-20% over the original asking price.


No matter what, buying a home will always be an emotional experience. The time constraints and competitiveness of a bidding war only increase the stress, so it’s important to step back, take a breath, and be honest with yourself about your situation. At the end of the day, make sure that you don’t regret your decision or force yourself into a situation that you can’t support.

We hope these tips will help you equip for the real estate battlefield though. If you ever find yourself in a bidding war, we hope you come out winning!

Until next time…keep it real!

About the Author:

I was fortunate enough to flip my first house the Summer before Senior year in high school and ever since real estate and entrepreneurship have been my passions. I get to live out both of those passions every day by helping real estate professionals from around the world market, advertise, lease, and sell their properties and spaces in new, innovative ways using video.