Use an escalation clause

Maybe a home has a fair market value of $500,000, but the listing price is $485,000. Rather than making a significant offer like $530,000, where you might run into appraisal issues and have to pay thousands of dollars out of pocket, you can use an escalation clause.

An escalation clause allows you to beat out other offers by a specific dollar amount until your offer reaches a set cap. For example, you could write in an escalation clause when you make an offer that adds $1,000 to any offer until you reach your cap. So if someone offered $501,000 on the house, for instance, you would automatically offer $502,000 until your cap is met.

Research comparable homes and their values so you can determine the max offer you can make without having appraisal issues, and use that to set the cap for your escalation clause.

Escalation clauses are great tools for winning bidding wars because they allow you to provide an attractive offer to the seller and protect you from paying too much for the property. If the seller accepts your offer at $515,000 in the above scenario, for example, they must provide you with proof that they had offers at $514,000.

Using this strategy can help you beat out competitors when you are trying to buy your dream home.

Increase your earnest money deposit

Another way to help encourage the seller to increase your earnest money deposit. These deposits are typically 1-3% of the property’s price, and they are a form of “good faith” deposit that will help put the seller at ease.

Earnest money deposits show the seller that you are a serious buyer and that you have the money to back up your offer. If you want to show the seller that you are fully committed to the purchase, you may even set a certain date before the close of escrow for the sellers to receive the earnest money in their account.

When you make an earnest money deposit, it lets the sellers know you are dedicated to seeing the purchase through to the end, helping make you a more ideal buyer in their eyes. If you’re still in tough competition consider making a portion of your earnest money going “hard” at a certain part of the accepted contact. That means the seller would keep the agreed upon portion after the selected day in the contract has passed. 

Negotiate the close of escrow

A typical close of escrow is 30 days with day 1 being the day your offer is accepted and day 30 being the day when the keys are in your hands. 

If you want to make your offer more attractive without additional out of pocket expenses you should talk to the seller and find out their motivation for selling and use that to your favor. Maybe they want to sell the house quicker for whatever reason, and you can agree to close on escrow sooner than 30 days (make sure you check with your lender first). Maybe they want an extended, 45 day close instead.

Figuring out what is best for the seller in terms of closing can go a long way.

Consider seller concessions

If at all possible, it is better for you to make an offer that does not have any concessions. When a seller receives several offers, it is likely that at least one will not have any concessions, which might make it the frontrunner.

When buyers want the sellers to cover thousands of dollars in closing costs, it makes their offer a lot less attractive than ones where there are no seller concessions. Remember, a “clean offer” is more attractive, especially in highly competitive markets. 

Write these five factors down and try your best to only consider homes that meet these expectations. While you may end up needing to compromise here and there due to the nature of the housing market, having a list will allow you to get as close as possible to what you want and make it easier for you to narrow down your choices.

Shorten the due diligence period

The standard boilerplate inspection period is going to be 10 days; however, if you are trying to beat out multiple offers, you might want to shorten this window of time to 7 or 8 days.

Make sure that you still have plenty of time to get the inspections you need so that you do not end up with a home that has major issues, but consider reducing the due diligence period to help move the process along faster and reduce headache for the seller.

When you are caught in a bidding war, try using these strategies to come out on top! Are there additional strategies to help you win?.. Absolutely! Connect with Dan Weisinger today to learn how you can win!