How To Win A Bid War In Today's Real Estate Market
Like most other sectors, the real estate market took time to recover after the global financial crisis of 2008. Since 2009, real estate activity has steadily improved across the United States.
Bidding wars are synonymous with real estate. After all, dream homes don't come along very often.
After 10 years of solid real estate growth, however, the presence of bidding wars dropped to a decade low. According to a Redfin survey from Oct. 2019, responding real estate agents reported that just 10% of offers involved bidding wars.
Although COVID-19 hasn't completely shut down the U.S. real estate market, the pandemic has definitely discouraged homeowners from listing their properties for sale. Shortly after the novel coronavirus pandemic reared its ugly head in March, the number of new listings fell substantially. For the week ending May 8, 2020, total U.S. home listings fell 24% from the previous year, says a Redfin report.
A Redfin report that surveyed real estate agents in June 2020 showed that some 54% of offers involved bidding wars. The high prevalence of bidding wars has held steady since then, reaching a high of 56% of offers as of January 2021.
With so much competition in the modern domestic real estate market, prospective homebuyers need to stand out among their competitors. Whether you're scoping out homes for sale in Long Beach, Long Island, or somewhere in between, you can use the following strategies to boost your odds of winning a bidding war.
All-Cash Offers Mean the World
We understand that every hopeful homebuyer won't be able to make an all-cash offer. The exclusivity of all-cash offers is what makes them so powerful.
Redfin tracked strategies used during bidding wars from 2016 to late 2019. It split the success of bidding war strategies into two categories: those between 2016 and 2017 and those between 2018 and Sept. 2019.
The major real estate brokerage and industry research giant found that all-cash offers were the single most effective strategy for bringing an end to bidding wars. All-cash offers improved the success rate of offers by 97% during the initial period and 206% during the latter period.
Sending Personal Letters to Sellers Could Also Help
Making personal appeals to home sellers could improve your chances of winning a bidding war. According to Redfin, this strategy boosted offers' success rates by 52% and 59%, respectively, from 2016 to 2017 and from 2018 to Sept. 2019.
Although it won't always work, try making an emotional appeal to the seller. Including sentiments about family members, childhood memories, and your future plans could all sway sellers into choosing you as the winner.
Get Rid of Contingencies
In the world of real estate, people often require deals to meet certain guidelines, such as passing home inspections. If these contingencies aren't met, parties can legally back out of buying homes without legal recourse.
Getting rid of financing-related contingencies is the third-best strategy you can use to compete in a bidding war, says Redfin. It improved offers' success rates by 58% and 20%, respectively.